As the largest financial companies scratch and claw to handle business for the world's largest corporations, banking companies like State Street Corp. in Boston and Northern Trust Corp. in Chicago are focusing on custody work for companies with less than $500 million of revenue.
State Street services $160 billion of assets for middle-market corporations, an increase of 190% in the last four years, said Joseph Antonellis, executive vice president for State Street's institutional investor service. Mr. Antonellis said State Street can provide a service that regional banks cannot. 
"We can provide them with all the services that we give to our largest clients," Mr. Antonellis said. State Street's menu includes master trust services, Taft-Hartley work, global custody, performance accounting, and foreign trading and cash management, Mr. Antonellis said.
State Street's acquisition of Wachovia Corp.'s institutional trust and custody business in April was a boon to the Boston company, doubling its middle-market assets under custody and giving it a national presence. State Street retained servicing rights on 81% of the $61 billion under custody at Wachovia of Winton-Salem, N.C. The deal gave State Street a presence in Florida, Virginia, Georgia, and North Carolina. It already did business in Massachusetts, Washington, Kansas, and California.
"When we started handling middle-market businesses, we were squarely based in Boston, but to be successful you need a local presence," said Mr. Antonellis. "Clients need to be able to see us."
John McClure, an executive vice president at Northern Trust, said that once a large banking company establishes a foothold in a particular market, regional banks that had dominated the middle-market customer base do not stand a chance because they cannot offer the same range of services. Northern Trust has targeted middle-market corporations for 10 years. Since 1996, it has increased the assets it services in this category by 258%, to $68 billion.
But Mr. McClure said working with middle-market businesses is a different game because they tend to be more closely held. "Oftentimes you are dealing with individuals and families here, and you have to be" conscious of that, he said. "We see a lot of enduring relationships here where we begin to manage a family's wealth and set things up to handle services for generations."
Analysts said investment banks are increasing their attention to middle-market businesses because large investment companies like J.P. Morgan and Morgan Stanley Dean Witter are saturating the market's high end.
"The Salomons of the world are big competition that can offer cheaper financing than banks can," said James Overholt, a consultant at Milliman & Robertson Inc. of Chicago. "This is going to lead more banks to apply their management talents where they have a competitive advantage."
That advantage leads to referrals and increased business for banking companies like State Street. Since taking over Wachovia's business in the Southeast, Mr. Antonellis said, his company has gotten 15 referrals to handle banking for other middle-market companies.
"We have our foot in the door down in the South," he said, "and our reach is only going to get wider.''
