Charles Schwab & Co. expects to sign up 5 to 10 banks within the next three years to distribute its popular OneSource mutual fund supermarket, according to a top official.

"I think the banks are going to bring us tens of millions, hundreds of millions of dollars," said David S. Pottruck, president and chief executive officer of Charles Schwab, in an interview Monday.

"There are a lot of people who are only going to do business with a bank, and we would like to be a part of that," said Mr. Pottruck, who was attending a Charles Schwab-sponsored conference here in the company's hometown.

Schwab already has distribution relationships for OneSource, its no- transaction fee fund supermarket, with Cleveland-based KeyCorp and Charlotte, N.C.-based First Union Corp. Now the firm is in discussions with "several major banking institutions" interested in adding the mart to their product lines, Mr. Pottruck said.

He said he did not know when those negotiations would yield deals, adding that he did not want to "predict the speed of decision-making at a bank."

Mr. Pottruck said Charles Schwab does not want to form a distribution relationship for the 800-fund OneSource mart with every U.S. bank.

"Our goal is to make KeyCorp and First Union very successful. If we make them very successful, other banks will be knocking on our door," he said.

Mr. Pottruck said that Schwab expects to strike deals with one bank per region. However, there might be some overlap in certain areas, given the pace of bank consolidation.

Schwab is also pitching OneSource distribution proposals to regional broker-dealers, said Mr. Pottruck. Schwab is, however, focusing on firms of size. "We made the decision early on that weren't going to try and launch this by going after little community banks or all those little 27-person broker-dealer firms," he said.

Mr. Pottruck said it is too soon to identify any possible partners. Outside of banks and broker-dealers, Charles Schwab is not looking at any other financial institutions right now, he said.

Meanwhile, Mr. Pottruck said, he does not see banks with their own fund marts as direct competitors with OneSource. Banks are focused more on selling their own funds as well as third-party funds, he said. Schwab has $54 billion in its funds, versus $100 billion in third-party funds.

NationsBank and some others are building their own marts to hold on to customers "to keep them from leaving to go to Schwab."

Mr. Pottruck said that the future for distribution of OneSource at banks is as the "underlying program for a wrap account program."

Mr. Pottruck said that during the last two weeks Charles Schwab moved to increase its capacity for dealing with on-line trades by roughly 50% The move, similar to one made by Boston-based Fidelity Investments Inc., follows trading snafus experienced by on-line providers during the market volatility in October.

While Schwab was looking at increasing its capacity before October's chaos, the volatility sped things up, said Mr. Pottruck. Schwab doubled its mainframe capacity by 50% at its primary location in Phoenix.

Before October, when customers waited 30 seconds to trade on-line compared to the usual seven, Schwab always strived to handle about two and a half times its daily volume, or roughly 250,000 trades on-line.

"That's what we thought the upper end of capacity demand would look like," he said. However, during trading on Oct. 28, when 1.2 billion shares traded on the Big Board, Schwab handled "over 300 times our normal volume," he said. Now Schwab wants to be able to handle "over 500,000 trades" on- line in a day.

While Schwab wants to provide the best on-line service possible, it is not going to get dragged into the current on-line trading wars, said Mr. Pottruck. Schwab does not intend to reduce its $29.95 per on-line trade fee to compete with Quick & Reilly's new no-frills subsidiary, Suretrade Inc., which came out with a $7.95 fee last week.

"When commissions get that low they should be called gratuities," said Mr. Pottruck. "Our focus is on how to provide more value and more service," he said.

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