Mellon Financial Corp. said Tuesday that it had consolidated two units that provide employee benefit services in a continuing reorganization of its fee-based business lines.

Dreyfus Retirement Services and the Buck Consultants administrative services group have been combined in a new business unit, Mellon Employee Benefit Solutions, offering defined contribution, defined benefit, and health and welfare services and programs.

Headquartered in New York, the new unit provides investment management and consulting, record keeping and administration, trust and custody services, actuarial services, self-directed brokerage accounts, and online access for corporate clients and their employees.

The consolidation is another step in Pittsburgh-based Mellon's transformation from a regional retail bank to a fee-based asset management firm. Other banking companies have been making similar changes, notably State Street Corp. in Boston, which shed the last vestiges of its commercial banking business in 1999 and now focuses on asset management and securities processing.

Mellon is reportedly in negotiations to sell its retail banking operations to Providence, R.I.-based Citizens Financial Group Inc., a unit of Royal Bank of Scotland. Neither Mellon nor Citizens would comment on the reports, which came out late last week.

Dennis LaPlante, a bank analyst at Fox-Pitt Kelton, said investment management and asset processing already account for 80% of Mellon's revenue. "That is what all of this reorganization is about - getting units together to become a well-consolidated asset manager," he said.

Gerard Cassidy, an analyst with Tucker Anthony Sutro Capital, said Mellon has spent five or six years sharpening its focus on asset management.

"Mellon is getting out of loans and exiting lower-profit businesses," Mr. Cassidy said.

Mellon acquired Dreyfus in 1994 and Buck in 1997, but until Tuesday the two units sold their products and services independently, under their own names.

Jude Metcalfe, president and chief executive officer of Mellon Employee Benefit Solutions, said that the new unit allows Mellon to target its efforts more efficiently.

"These two business had similar business models and significant overlap. Together they are much larger and stronger, Mr. Metcalfe said."

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