With a major competitor breathing hotly down its neck, Fleet Financial Group took another step this week to give itself some global reach.

The $87 billion-asset banking company announced an agreement Tuesday that would allow its customers with operations in the United Kingdom to get cash management services from London-based National Westminster PLC.

In return, Boston-based Fleet will provide the same kind of banking services to Natwest's customers here in the U.S.

The move by Fleet comes in response to the international success of rival Bank of Boston Corp., analysts said. The bank has undertaken an extensive campaign over the last 12 months to promote U.S. exports overseas and its own trade finance capabilities.

"We're responding to what Bank of Boston does," said Robert A. Johnson, Fleet's senior vice president for international services. "But we're also responding to what our customers tell us they need."

Goldman Sachs & Co. analyst Sally Pope Davis lauded Fleet's move.

"Fleet had to come up with a credible response" to Bank of Boston, she said. "They need to fortify their international presence, which is very, very small."

Fleet has only one overseas branch, in London, which employs about 20 people.

"When a bank gets to a certain size, they have to start thinking about how to serve all their customers," Ms. Davis added.

According to the agreement between Fleet and Natwest, the two companies will earn fees based on the transactions they process without an income- splitting arrangement, Mr. Johnson said.

The marketing effort was targeted directly at midsize companies, Fleet's bread-and-butter market, he said.

"We have 40,000 corporate banking relationships," he added. "About 90% of them are middle market companies, those with $250 million in annual revenues per year or less. Perhaps 20,000 of these companies need some kind of international services."

Mr. Johnson refused to say how much fee income the agreement might generate for Fleet. But banking analyst Michael Granger, of Fox-Pitt, Kelton, said it could be as much as $2 million annually.

Fleet's agreement with Natwest follows two other international moves by the bank this year. In February, the Boston regional set up a trade finance arrangement with Standard Chartered Bank PLC to provide letters of credit to Fleet customers doing business in Asia.

And, in June, Fleet president and chief executive Terrence Murray became one of three American bankers on the 16-member board of the International Monetary Conference, an influential global banking association with 102 members from around the world.

"This is part of Terry Murray's vision of what a large bank- chartered organization will need to do in the future," said Thomas Brown, a banking analyst with Donaldson, Lufkin & Jenrette. Mr. Murray "was talking about the need for this company to develop an international banking component before the Shawmut acquisition," which closed late last year.

Fleet's deal to buy Natwest's New Jersey-based U.S. retail operation helped set the stage for the cash management agreement. Mr. Johnson called the cash management arrangement "an appendage" of the acquisition.

Negotiations for the cash management venture began late in the first quarter of 1996, he said, right after the merger agreement was concluded.

Natwest has struck similar sorts of deals with other companies that have bought its retail operations, namely Societe Generale, in France. The London-based banking company also has like agreements with Commerzbank in Germany, and Credito Italiano in Italy.

Through the merger agreement and the cash management venture, Fleet and Natwest have developed a strong relationship. Mr. Johnson said that rapport has allowed Fleet to pursue deals of its own with Natwest's partners in Continental Europe.

"We have already started those types of conversations," Mr. Johnson said. "Continental Europe is very important to us."

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