The cash management business continues to grow at a stable rate, but this year bankers are predicting the lowest level of revenue growth in 11 years, according to a soon-to-be-released report.

Bankers participating in Ernst & Young's 11th annual cash management services survey estimate that cash management revenues will grow by only 6.25% in 1994, the first time in the history of the survey that growth rates were expected to drop below 7%.

"The fact that it's been going down is not a surprising statistic," said Al Briand, vice president of cash management services with Chemical Banking Corp. "There are a lot of factors like consolidation, cost [efficiencies], and increased productivity. The sum total is that it's a mature industry."

The survey of the top 300 U.S. banks found that fee payments provide 62% of all cash management revenue, with compensating balances contributing the remaining 38%.

Survey responses also found that data on quality, such as the number of customer complaints and level of satisfaction, continued to be an important area that banks tracked. While most banks have long measured quality, this year's survey found more banks willing to share their data with customers. In 1994, 64% of banks planned to share their quality data, up from 51% in 1991.

"You'd think that banks would be somewhat resistant to this, but frankly, banks are doing a pretty good job at this," said Larry Forman, market research manager with Ernst & Young. "They don't make many mistakes and their reject rates and their quality numbers look pretty good."

The survey also found that large banks (over $30 billion of assets) continued to get much of their cash management business from large corporate customers, which are defined as over $250 million of annual sales. Large clients accounted for half of cash management revenue among the top 20 banks. Mr. Briand said that one factor was that large banks have the credit facilities that corporate clients want.

"There's a heavy reliance on the large corporate segment," Mr. Briand said. "That's because the major players have the depth of products that will attract the more complex companies."

Nevertheless, for all other banks in the survey - those with less than $30 billion of assets - middle-market companies with annual sales between $50 and $250 million a year contributed as much cash management revenue as large corporations. More remarkably, banks with less than $30 billion in assets also report that small businesses (with annual sales under $50 million) generate an impressive 22% of cash management revenue.

Another finding was that among the top 20 banks, there were large numbers of customer service staff compared to sales staff, which was opposite of what was found among the rest of the responding banks.

The larger service staff among the top banks reflected more commitment to maintaining the perception of quality as many of the larger banks undergo mergers and acquisitions, according to Ernst & Young.

But another reason given by Mr. Briand is the separation of duties among the cash management staff.

"The survey seems to be saying that more individuals are dedicated to the customer service function," Mr. Briand said. "I think there is a correlation. Sales staff sometimes would get into the service kinds of activities. Now, there's been more of a delineation."

Beth Piskora contributed to this article.

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