Top mutual fund companies are stepping up their pursuit of corporate cash management business at banks - and that's creating a tough choice for banks.

Eager to participate in the $1.5 trillion-a-day market for corporate cash services, companies like Fidelity Investments, Aim Management Group, and OppenheimerFunds are wooing large banks with juicy fee-sharing arrangements and cutting-edge products.

Industry experts say that in the face of such offers, banks - which have spent recent years building up a presence as managers of short-term corporate cash - are suddenly rethinking their strategies.

xThe question for banks: whether to continue amassing assets in hopes of generating a steady stream of fees, or simply grab the revenues that the fund companies are dangling before them.

"I'm aware of 15 of the largest banks today having this debate," said Anthony Carfang, a partner with Treasury Strategies Inc., a Chicago-based consulting firm that tracks the cash management business.

Among those banks: Citicorp, Bank of Boston Corp., and PNC Bank Corp.

The decision facing these institutions is anything but clear-cut.

Banks have long viewed cash management as an opportunity to extract fees from corporate borrowers. Indeed, banks generally charge as much as 0.5% of assets under management for managing money market funds, keeping custody of them, and maintaining reports of balances.

But though cash management is a high volume business, margins are low and customer loyalty thin. Big clients jump to other providers for a slight yield advantage.

Bank of Boston, which offers a proprietary money market fund to its corporate cash customers, is weighing additional products from Fidelity Investments and Goldman, Sachs & Co., an executive at the $47 billion-asset banking company said. The reason: customers want more choices and higher yields.

"We'd like to manage all the money ourselves, but we can't be all things to all people," said Thomas Kennedy, director of mutual fund planning and corporate services at Bank of Boston Corp.

The revenue-sharing arrangements are also a draw, Mr. Kennedy said. Fund companies, anxious to get a foot in the door at banks, are offering heftier fees than banks can generate on their own, he explained.

First Security Corp., Salt Lake City, took the bait. The bank began farming out the management duties of its money market fund to a private money manager in 1994, and offers cash management clients the funds of outside companies, such as Fidelity.

"We felt that we could do as well if not better by having a fee arrangement with an outside money manager," said John Rudisill, the senior vice president who manages First Security's mutual funds center.

But Mr. Carfang of Treasury Strategies sounds a note of caution. He says large banks - which in the past decade have ceded much of the corporate cash management business to brokerage firms like Merrill Lynch & Co. - could squander a natural advantage if they began sharing their corporate customers with mutual fund companies.

"Ultimately, the largest banks have the wherewithal to offer a complete line of investment products, so they ought to be doing this themselves," he said.

Some banks share his concern.

Union Bank of California, for example, is committed to selling its proprietary funds as part of its sweep account business. The San Francisco bank, owned by Bank of Tokyo-Mitsubishi Ltd., says the yields of such funds are so much alike that it needn't use other suppliers.

"We have perfectly good money market funds," said R. Gregory Knopf, vice president and manager of mutual funds. 'Why would I sweep those assets into another company's funds?"

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