The sweep account, one of banking's most profitable cash management products, lost some luster in 1998.

Revenues from the accounts fell 23%, to $2.01 billion, according to a study by Treasury Strategies Inc.

Michelle Hoffmann, an analyst at the Chicago consulting firm, said a flattened yield curve in fixed-income securities ate into the spreads that generate sweep-account earnings.

The unfavorable rate environment in the second half chopped revenue from the average account to $7,058, from $10,817 in 1997, said Treasury Strategies, which surveyed 245 banks.

But sweeps, which involve the temporary placement of idle transaction- account funds in interest-bearing instruments, are still "one of the strongest products" banks offer, Ms. Hoffmann said.

Average daily balances that were swept rose 29% in 1998, to $246 billion. The rate of increase fell from 37% in 1996 and 49% in 1995.

Use of the product has grown dramatically since 1991, when the daily average balance in sweep accounts was only $21 billion.

Banks increasingly are viewing the service as a way to draw funds away from competing mutual fund firms and investment houses.

"Banks are making a more concerted marketing effort to bring in balances that were outside of the bank," Ms. Hoffmann said.

Treasury Strategies estimated that 64% of the largest 1,471 banks sell sweep products. All with $10 billion or more of assets offer it, as do 84% of banks with $2 billion to $10 billion of assets, and 59% of those with less than $2 billion.

"The biggest market to be tapped is the smaller-business customer," Ms. Hoffmann said. "We see a lot of banks going after this segment," which typically invests its assets directly into money market mutual funds.

This is the product $37 billion-asset BB&T Corp. added to its line of sweep services on Wednesday. It is available to small businesses with excess checking account balances of $25,000 to $100,000 at the end of each business day.

"We asked our small-business customers what they needed, and this is what they asked for," said Abbott Whitney, manager of treasury services at BB&T, which has been named the top small-business-friendly bank holding company by the Small Business Administration.

Lawrence Forman, a cash management analyst at Ernst & Young in New York, said sweeps are increasingly being used by larger corporations as well.

"The majority of large corporate balances is actively managed (internally), but there is always a percentage that is left over," he said.

Commercial paper and repurchase agreements were the most popular outlets for sweep-account funds, said Treasury Strategies. Its report focused only on corporate cash managers, though some retail and trust customers also use sweeps.

Overnight instruments received an average daily volume of $130 billion, or 53% of the total swept. Money market funds got $51 billion, and offshore securities, in which funds are sent to U.S. bank affiliates, held $46 billion.

Some banks may be forced into selling sweep accounts for defensive reasons, Mr. Forman said.

"In the New York metro area, you can't sell cash management services without offering sweeps," he said, though in other parts of the country sweeps are not actively sold.

Theoretically, he added, a bank could keep all the revenues that excess checking account balances yield. But "banks tend to hold back until someone bursts the bubble and then everybody starts selling it from a defensive standpoint."

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