Merrill Lynch & Co., a newcomer to on-line brokerage, plans to offer banking services over the Internet as well.

"We are looking to create a next-generation bank" on the Internet, said John McKinley, chief technology officer and executive vice president, in an interview.

Merrill already offers a wide array of banking products, including credit cards, loans, mortgages, checking accounts, and investments, Mr. McKinley said. This month it began offering FDIC-insured cash management accounts.

"We are looking at how we can package all of it," Mr. McKinley said, speaking after his keynote address at the "IT for Wall Street" conference in New York this week. "We want to be able to serve a broader role in the financial affairs of our clients."

Other on-line brokerages are seeking similar expansion. Many already offer banking products such as checking accounts and loans. Thus far TD Waterhouse has an Internet bank that is closely aligned with its discount brokerage, and E-Trade Group, by acquiring Telebank, has gained the same capability.

Mr. McKinley said Merrill would not spin off its Internet banking services into a separate organization but would market them under a new brand name, which is still under development. American Express took that route last summer when it launched Membership Banking, an Internet banking service it is marketing to existing customers.

Mr. McKinley also declined to comment on industry speculation that the brokerage is using software from Sanchez Computer Associates Inc. to support its on-line banking offering. Several large institutions already have adopted Sanchez's Internet banking outsourcing services to support separately branded Internet banking efforts. Citigroup Inc. uses Sanchez to support its Citi f/i Internet-only bank, and First USA uses it to support its Internet-only

Officials at Malvern, Pa.-based Sanchez have said only that it has sold its software or outsourcing services to one large brokerage firm and three large credit card companies that are building Internet banks.

A packaged on-line bank offering is logical for Merrill, said Octavio Marenzi, managing director of Celent Communications, a Cambridge, Mass.-based research company. "Financial institutions are offering a wider array of products on-line and are looking to cross-sell those products. Merrill has come back strong in the on-line arena, but it was a late entrant and it needs to deepen its existing customer relationships."

Merrill, which launched on-line brokerage services less than three months ago, will broaden its reach into banking only if it can integrate its banking services with its existing on-line brokerage offerings, Mr. Marenzi said. If on-line banking has "a separate Web site and a separate log-on area, it will not work."

This integration may pose Merrill's greatest challenge, Mr. Marenzi said. "The people running the on-line brokerage area may say, 'We have nothing to do with mortgages; you have to do that,' and this could be a problem."

Mr. McKinley also said that Merrill is adopting a "Merrill Lynch anywhere" strategy that seeks to reach retail investors through a wide range of convenient devices, including palm pilots, cellular phones, and personal computers.

Mr. Kinley said Merrill's "nascent Internet appliance strategy" will be expanded to enable retail investors to gain access to Merrill's research, even through, say, cooking devices in their kitchens. The firm recently teamed up with Netpliance, an Austin, Tex., maker of wireless Internet access devices.

"We are looking toward a convergence of media, financial services, and communications in terms of a partnership," Mr. McKinley said. He declined to name the companies with which Merrill is in talks.

Such partnerships are the next step for full-service brokerages looking to capture market share among retail investors, said John Payne, a consultant with the Boston research firm Cerulli Associates.

"There is no question that the leading full-service brokerages will look to package and distribute their internal knowledge - their analysts' commentaries and research - to clients. We envision firms like Merrill developing broadcast companies to package this information to retail customers. They want to have their own CNBC."

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