Even though it's in the midst of a major cost-cutting effort, Firstar Corp. said it plans to invest $20 million by mid-1997 in technology for its lending, trust, and credit card operations.

"Where Firstar is going to distinguish itself is in fee-income businesses," chairman and chief executive Roger Fitzsimonds told Chicago analysts last week. He singled out trust and investment services as a major growth business, saying it increased 10% last year, to $132 million. Firstar hopes to increase that business further through an enhanced computer system.

Identifying revenue growth is important to Firstar because once it concludes its cost cutting by midyear 1997, it will face pressure to increase earnings or sell.

"Management's done a great job of streamlining the organization and pulling the costs out," said analyst William McGinnis of Robert W. Baird & Co. "The next challenge is to build revenues."

Firstar, with $19 billion in assets, announced in January that it planned to cut 2,500 jobs, or about 25% of its work force. The job cuts were part of a plan to reduce annual operating costs by $110 million over the next year and a half.

In the same time frame, the Milwaukee-based company hopes to increase fee revenue by $30 million a year. Mr. Fitzsimonds said that revenue is going to come from trust, credit cards, and streamlined lending to small businesses.

There's a "huge untapped potential" in small-business lending, Mr. Fitzsimonds said, noting that 65% of Firstar's business loans are for amounts under $100,000. Firstar plans to automate loan applications and credit-score them to reduce underwriting expenses.

Additionally, Mr. Fitzsimonds expects further growth in its credit card business. In 1995, Firstar earned $63 million on credit card fees, a nearly 12% increase over 1994. However, Mr. Fitzsimonds said, the company is keeping a close watch on its $600 million credit card portfolio. Chargeoffs were 3% at the end of the first quarter.

Acknowledging that credit quality is a concern industrywide, Mr. Fitzsimonds said that Firstar will control its credit card delinquencies through tight standards - and by not straying far from its Midwest bank markets to issue cards. It sells its cards through its own banks and through a network of 800 correspondent banks that share the risk of potential credit problems.

When asked if cost cutting is disrupting revenue growth, Mr. Fitzsimonds said the bank had met analysts' first-quarter expectations and showed an uptick in fee income. The first quarter included a $30 million charge for restructuring.

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