SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 17, 1996
FLEET FINANCIAL GROUP, INC.
RHODE ISLAND
1-6366 05-0341324
(Commission File Number) (IRS Employer Identification No.)
One Federal Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-292-2000
------------------------------------------------------------
(Former name or former address, if changed since last report)
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Item 5. Other Events.
Pursuant to Form 8-K, General Instructions F, Registrant hereby
incorporates by reference the press release attached hereto as Exhibit 99.
Item 7. Financial Statements and Other Exhibits.
Exhibit No. Description
Exhibit 99 Fleet Financial Group, Inc.
Press Release
Dated July 17, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed in its behalf
by the undersigned hereunto duly authorized.
FLEET FINANCIAL GROUP, INC.
Registrant
By: /s/ William C. Mutterperl
_____________________________
William C. Mutterperl
Senior Vice President and
General Counsel
Dated: July 17, 1996
Contacts: Media: James Mahoney Investor: Thomas R. Rice
(617) 346-5472 (617) 346-0148
FLEET FINANCIAL GROUP REPORTS
SECOND QUARTER EARNINGS OF $278 MILLION
Boston, Massachusetts, July 17, 1996: Fleet Financial Group, Inc.
(FLT-NYSE) today reported net income of $278 million for the second quarter of
1996, or $0.96 per common share, an increase of 9% compared with $254 million,
or $0.91 per common share, earned in the second quarter of 1995. Return on
average assets and return on average common equity for the second quarter of
1996 were 1.32% and 17.20%, respectively, up from 1.22% and 16.79%,
respectively, for the second quarter of 1995. Earnings for the first six months
of 1996 were $542 million, or $1.89 per common share an increase of 13% compared
to $480 million, or $1.73 per common share, for the first six months of 1995.
Terrence Murray, Fleet's president and chief executive officer
expressed his satisfaction with the performance in the second quarter, "Fleet's
earnings power continues to build momentum as the tangible results of our
acquisition strategy become apparent. Significant accomplishments in the quarter
included the acquisition of NatWest on May 1, the consolidation of 169 branches
in connection with the Shawmut acquisition, and the signing of a definitive
agreement to sell Fleet Finance. These actions have created a more focused and
efficient organization, well positioned to serve our customers, communities, and
shareholders."
Fleet's chief financial officer, Eugene M. McQuade, noted that the
Company's earnings momentum was enhanced by fundamental factors in addition to
cost savings. "Net interest margin rose to 4.76%, an improvement of 76 basis
points since the fourth quarter of 1995. This margin expansion and the net
increase of $15 billion in assets from the NatWest acquisition have made an
important contribution to our ongoing earnings outlook."
Mr. Murray further commented on the continuing progress in integrating
the acquisitions. "Significant steps were taken this quarter toward fully
integrating Shawmut. We are gaining an expertise that will be leveraged into the
NatWest consolidation. NatWest's results were right on our expectations and we
continue to be excited by the prospects for this franchise."
INCOME STATEMENT
Net interest income totaled $863 million during the second quarter of
1996, an increase of $131 million from the first quarter of 1996. The increase
in net interest income is attributable to the acquisition of NatWest partially
offset by the loss of revenue from the branch divestitures in connection with
the Shawmut acquisition.
The Corporation reported a net interest margin of 4.76%, an increase
of 33 basis points over the 4.43% recorded in the first quarter of 1996. This
increase reflects the more favorable mix of earning assets and advantaged
liabilities as a result of the NatWest acquisition, which added higher-yielding
loans and lower-cost core deposits, coupled with the ongoing impact of the
balance sheet restructuring undertaken during the first quarter of this year.
The provision for credit losses was $48 million, compared to $35
million in the prior quarter and $28 million for the second quarter of 1995. Net
charge-offs for both the second quarter of 1996 and 1995 amounted to $76 million
despite the addition of $17 million of net charge-offs from NatWest.
Nonperforming assets increased by $192 million in the second quarter to $745
million with NatWest accounting for $165 million of the increase. The reserve
for loan losses was $1.6 billion at June 30, 1996 or 2.7% of loans compared to
$1.3 billion at March 31, 1996.
Noninterest income in the second quarter totaled $549 million, up $73
million from the second quarter of 1995 which included a $25 million gain on
interest rate contracts to manage prepayment risk at Fleet Mortgage. This
increase in noninterest income is attributable to $46 million from NatWest and
$32 million of gains relating to branch divestitures as a result of the Shawmut
merger. Revenues of $26 million at Fleet Private Equity, the Corporation's
venture capital business, were comparable with the first quarter as the value of
their investments has continued to strengthen. Investment services revenue
increased by $15 million year over year, or 19%, due to a strong equity market,
which resulted in an increase in the overall value of managed assets. Student
loan servicing revenue increased $7 million, or 47%, due to increases in the
volume of loans serviced as a result of the extension of our direct loan
servicing contracts with the government.
Noninterest expense in the second quarter of 1996 totaled $885
million, including $131 million related to NatWest, compared to the $797 million
during the second quarter of 1995. Excluding the incremental impact of NatWest,
noninterest expense declined $43 million from the year earlier, primarily the
result of lower compensation costs.
Total assets at June 30, 1996 were $87.7 billion, while total loans
and leases were $59.1 billion at the same date, a net increase of $15.6 billion
and $11.5 billion, respectively, from March 31, 1996 and attributable to the
acquisition of NatWest. Stockholders' equity amounted to $7.13 billion at June
30, 1996, and $6.84 billion at March 31, 1996, an increase of $283 million,
primarily attributable to the issuance of $175 million of preferred stock in
conjunction with the NatWest acquisition. Common equity to assets of 6.98% and
tangible common equity to assets of 5.06% were stronger than originally forecast
at the time of the NatWest acquisition.
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FLEET FINANCIAL GROUP
FINANCIAL HIGHLIGHTS
- --------------------------------------- -----------------------
THREE MONTHS ENDED SIX MONTHS ENDED
- --------------------------------------- -----------------------
- ------------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
June 30, March 31, June 30, June 30, June 30,
1996 1996 1995 1996 1995
- ------------- ------------ ---------- ----------- -----------
FOR THE PERIOD ($ IN MILLIONS)
$278 $264 $254 Net Income $542 $480
863 732 777 Net Interest income (a) 1,595 1,546
48 35 28 Provision for credit losses 84 48
PER COMMON SHARE
$0.96 $0.94 $0.91 Fully diluted earnings per share $1.89 $1.73
43.50 40.50 37.13 Market value (period-end) 43.50 37.13
0.43 0.43 0.40 Cash dividends declared 0.86 0.80
23.25 22.90 23.96 Book value (period-end) 23.25 23.96
AT QUARTER END ($ IN MILLIONS)
$87,728 $72,123 $87,168 Assets $87,728 $87,168
59,093 47,559 52,325 Loans and leases 59,093 52,325
68,145 50,121 55,715 Deposits 68,145 55,715
7,127 6,844 6,632 Total stockholders' equity 7,127 6,632
OPERATING RATIOS
1.32% 1.41% 1.22% Return on average assets 1.36% 1.18%
17.20 16.96 16.79 Return on common equity 17.09 16.47
17.08 17.08 16.69 Return on realized common equity (b) 17.08 16.11
4.76 4.43 4.15 Net interest margin 4.60 4.21
8.12 9.49 7.61 Total equity/assets (period-end) 8.12 7.61
7.0 9.2 8.2 Tier 1 risk-based capital ratio 7.0 8.2
(Estimated)
10.9 13.0 12.0 Total risk-based capital ratio 10.9 12.0
(Estimated)
ASSET QUALITY ($ IN MILLIONS)
$745 $553 $773 Nonperforming assets $745 $773
Nonperforming assets as a % of loans,
1.26% 1.16% 1.47% leases, and OREO 1.26% 1.47%
0.85 0.77 0.89 Nonperforming assets as a % of total 0.85 0.89
assets
1.17 1.05 1.30 Nonperforming loans to period-end 1.17 1.30
loans
2.70 2.71 2.85 Reserve for credit losses to 2.70 2.85
period-end loans
0.54 0.49 0.60 Net Chargeoffs/Average Loans 0.51 0.54
RESERVE FOR CREDIT LOSSES ($ IN
MILLIONS)
$1,287 $1,321 $1,525 Beginning reserve for credit losses $1,321 $1,496
48 35 28 Provision for credit losses 84 48
(107) (83) (108) Gross charge-offs (190) (192)
32 23 32 Recoveries 55 56
337 (9) 15 Acquisitions/Other 327 84
1,597 1,287 1,492 Ending reserve for credit losses 1,597 1,492
(a) Fully taxable equivalent.
(b) Excludes average unrealized gains/
losses on securities available for sale.
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FLEET FINANCIAL GROUP
CONSOLIDATED INCOME STATEMENTS
($ IN THOUSANDS)
- -------------------------------------- ----------------------
THREE MONTHS ENDED SIX MONTHS ENDED
- -------------------------------------- ----------------------
- ------------- ------------ ----------- ---------- -----------
June 30, March 31, June 30, June 30, June 30,
1996 1996 1995 1996 1995
- ------------- ------------ ----------- ---------- -----------
$1,484,923 $1,345,047 $1,551,845 Interest Income (FTE) $2,829,970 $3,012,563
621,797 613,241 774,902 Interest expense 1,235,038 1,466,450
- ------------- ------------ ----------- ------------------------------------------- ---------- -----------
863,126 731,806 776,943 Net Interest Income (FTE) 1,594,932 1,546,113
- ------------- ------------ ----------- ------------------------------------------- ---------- -----------
48,276 35,265 27,632 Provision for credit losses 83,541 47,796
- ------------- ------------ ----------- ------------------------------------------- ---------- -----------
814,850 696,541 749,311 Net interest income after provision for 1,511,391 1,498,317
credit losses
- ------------- ------------ ----------- ------------------------------------------- ---------- -----------
Noninterest income:
146,129 119,290 124,846 Service charges, fees, and commissions 265,420 247,059
133,229 123,717 139,765 Mortgage banking 256,946 242,502
93,489 87,252 78,437 Investment services revenue 180,741 157,026
22,411 22,038 15,273 Student loan servicing fees 44,449 30,083
20,097 17,648 4,321 Securities available for sale gains 37,746 4,885
31,750 59,885 0 Branch divestiture gains 91,635 0
101,991 89,791 112,823 Other 191,781 198,323
- ------------- ------------ ----------- ------------------------------------------- ---------- -----------
549,096 519,621 475,465 Total noninterest income 1,068,718 879,878
- ------------- ------------ ----------- ------------------------------------------- ---------- -----------
Noninterest expense:
410,503 347,804 364,791 Employee compensation and benefits 758,308 725,614
75,298 61,017 60,979 Occupancy 136,315 123,831
68,164 56,662 51,349 Equipment 124,827 101,446
48,084 41,360 46,463 Mortgage servicing rights amortization 89,443 70,300
30,474 25,333 25,987 Intangible asset amortization 55,807 47,603
23,510 21,885 21,503 Marketing 45,395 42,154
2,078 2,110 29,372 FDIC assessment 4,187 58,003
0 0 13,588 Merger related charges 0 50,488
227,013 202,172 183,199 Other 429,185 343,893
- ------------- ------------ ----------- ------------------------------------------- ---------- -----------
885,124 758,343 797,231 Total noninterest expense 1,643,467 1,563,332
- ------------- ------------ ----------- ------------------------------------------- ---------- -----------
478,822 457,819 427,545 Income before income taxes 936,642 814,863
8,585 7,681 13,408 Tax-equivalent adjustment 16,266 26,397
192,510 186,336 160,114 Applicable income taxes 378,847 308,450
- ------------- ------------ ----------- ------------------------------------------- ---------- -----------
277,727 263,802 254,023 Net income 541,529 480,016
============= ============ =========== =========================================== ========== ===========
$258,413 $251,264 $244,325 Net income applicable to common shares $509,677 $461,886
============= ============ =========== =========================================== ========== ===========
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FLEET FINANCIAL GROUP
CONSOLIDATED BALANCE SHEETS
($ IN MILLIONS)
---------- ------------ -----------
June 30, March 31, June 30,
1996 1996 1995
---------- ------------ -----------
ASSETS:
Cash and cash equivalents $7,048 $5,113 $5,263
Securities 11,415 10,091 20,644
Loans and lease financing 59,093 47,559 52,325
Reserve for credit losses (1,597) (1,287) (1,492)
Mortgages held for resale 1,860 2,398 1,578
Mortgage servicing rights 1,543 1,406 1,228
Premises and equipment 1,296 974 1,024
Other intangibles 1,773 1,071 1,163
Other assets 5,297 4,798 5,435
- ------------------------------------------------------ ---------- -- ------------ - -----------
Total assets $87,728 $72,123 $87,168
====================================================== ========== == ============ = ===========
LIABILITIES:
Deposits:
Demand $17,527 $10,485 $11,075
Regular savings, NOW, money market 28,801 21,783 23,319
Time 21,817 17,853 21,321
- ------------------------------------------------------ ---------- -- ------------ - -----------
Total deposits 68,145 50,121 55,715
- ------------------------------------------------------ ---------- -- ------------ - -----------
Federal funds purchased and repurchase agreements 2,756 3,810 10,186
Other short-term borrowings 1,881 3,363 6,321
Accured expenses and other liabilities 2,516 1,985 1,586
Long-term debt 5,303 6,000 6,728
- ------------------------------------------------------ ---------- -- ------------ - -----------
Total liabilities 80,601 65,279 80,536
- ------------------------------------------------------ ---------- -- ------------ - -----------
STOCKHOLDERS' EQUITY:
Preferred stock 1,003 824 682
Common stock 6,124 6,020 5,950
- ------------------------------------------------------ ---------- -- ------------ - -----------
Total stockholders' equity 7,127 6,844 6,632
- ------------------------------------------------------ ---------- -- ------------ - -----------
Total liabilities and stockholders' equity $87,728 $72,123 $87,168
====================================================== ========== == ============ = ===========
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FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ IN MILLIONS)
-----------------------------------------------------------------
THREE MONTHS ENDED
-----------------------------------------------------------------
-------------------- ------------------- -------------------
June 30, 1996 March 31, 1996 June 30, 1995
-------------------- ------------------- -------------------
--------- ------- -------- ------- --------- -------
Average Rate Average Rate Average Rate
Balance Balance Balance
--------- ------- -------- ------- --------- -------
ASSETS:
Money market instruments $1,428 5.12% $699 5.11% $1,093 6.32%
Securities 11,481 6.32 12,130 6.24 21,517 6.22
Loans and leases 55,935 8.58 49,497 8.61 51,052 9.21
Mortgages held for resale 2,190 7.79 2,085 7.48 1,086 8.85
Other earning assets 1,758 10.97 1,790 10.70 --- ---
Foreclosed property and repossessed 56 --- 60 --- 103 ---
equipment
- ----------------------------------------- --------- -- ------- -- -------- -- ------- - --------- - -------
Total interest-earning assets 72,848 8.18% 66,261 8.15% 74,851 8.29%
- ----------------------------------------- --------- -- ------- -- -------- -- ------- - --------- - -------
Reserve for credit losses (1,510) --- (1,318) --- (1,515) ---
Other assets 13,442 --- 10,083 --- 10,105 ---
========================================= ========= == ======= == ======== == ======= = ========= = =======
Total assets $84,780 --- $75,026 --- $83,441 ---
========================================= ========= == ======= == ======== == ======= = ========= = =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Savings $26,494 2.25% $22,097 2.45% $22,899 2.59%
Time 20,920 5.43 19,152 5.62 20,006 5.69
- ----------------------------------------- --------- -- ------- -- -------- -- ------- - --------- - -------
Total interest-bearing deposits 47,414 3.65 41,249 3.92 42,905 4.04
- ----------------------------------------- --------- -- ------- -- -------- -- ------- - --------- - -------
Short-term borrowings 6,941 5.10 8,059 5.30 15,045 5.90
Long-term debt 5,871 7.10 6,080 6.92 6,682 7.29
========================================= ========= == ======= == ======== == ======= = ========= = =======
Total interest-bearing liabilities $60,226 4.15% $55,388 4.45% $64,632 4.81%
========================================= ========= == ======= == ======== == ======= = ========= = =======
Net interest spread --- 4.03% --- 3.70% --- 3.48%
========================================= ========= == ======= == ======== == ======= = ========= = =======
Demand deposits and other noninterest- $15,218 --- $11,180 --- $10,623 ---
bearing time deposits
Other liabilities 2,296 --- 1,916 --- 1,667 ---
- ----------------------------------------- --------- -- ------- -- -------- -- ------- - --------- - -------
Total liabilities 77,740 --- 68,484 --- 76,922 ---
- ----------------------------------------- --------- -- ------- -- -------- -- ------- - --------- - -------
Stockholders' equity 7,040 --- 6,542 --- 6,519 ---
- ----------------------------------------- --------- -- ------- -- -------- -- ------- - --------- - -------
Total liabilities and stockholders' equity $84,780 --- $75,026 --- $83,441 ---
========================================= ========= == ======= == ======== == ======= = ========= = =======
Net interest margin 4.76% 4.43% 4.15%
========================================= ========= == ======= == ======== == ======= = ========= = =======
<PAGE>
FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ IN MILLIONS)
------------------------------------------------------------
SIX MONTHS ENDED
------------------------------------------------------------
----------------------------- ---------------------------
June 30, 1996 June 30, 1995
----------------------------- ---------------------------
--------------- ----------- ----------- -----------
Average Average
Balance Rate Balance Rate
--------------- ----------- ----------- -----------
ASSETS:
Money market instruments $1,064 5.11% $1,064 6.25%
Securities 11,805 6.27 21,643 6.22
Loans and leases 52,716 8.60 49,935 9.13
Mortgages held for resale 2,138 7.64 827 8.74
Other earning assets 1,774 10.83 --- ---
Foreclosed property and repossessed equipment 58 --- 107 ---
- ---------------------------------------------- --------------- - ----------- -- ----------- --- -----------
Total interest-earning assets 69,555 8.17% 73,576 8.22%
- ---------------------------------------------- --------------- - ----------- -- ----------- --- -----------
Reserve for credit losses (1,414) --- (1,520) ---
Other assets 11,762 --- 9,771 ---
- ---------------------------------------------- --------------- - ----------- -- ----------- --- -----------
Total assets $79,903 --- $81,827 ---
============================================== =============== = =========== == =========== === ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Deposits:
Savings $24,296 2.34% 23,126 2.53%
Time 20,035 5.52 19,410 5.53
- ---------------------------------------------- --------------- - ----------- -- ----------- --- -----------
Total interest-bearing deposits 44,331 3.78 42,536 3.90
- ---------------------------------------------- --------------- - ----------- -- ----------- --- -----------
Short-term borrowings 7,500 5.21 14,114 5.82
Long-term debt 5,976 7.01 6,498 7.33
- ---------------------------------------------- --------------- - ----------- -- ----------- --- -----------
Total interest-bearing liabilities $57,807 4.30% 63,148 4.68%
============================================== =============== = =========== == =========== === ===========
Net interest spread --- 3.87% --- 3.54%
============================================== =============== = =========== == =========== === ===========
Demand deposits and other noninterest-
bearing time deposits 13,199 --- 10,766 ---
Other liabilities 2,106 --- 1,593 ---
- ---------------------------------------------- --------------- - ----------- -- ----------- --- -----------
Total liabilities 73,112 --- 75,507 ---
- ---------------------------------------------- --------------- - ----------- -- ----------- --- -----------
Stockholders' equity 6,791 --- 6,320 ---
- ---------------------------------------------- --------------- - ----------- -- ----------- --- -----------
Total liabilities and stockholders' equity $79,903 --- $81,827 ---
============================================== =============== = =========== == =========== === ===========
Net interest margin 4.60% 4.21%
============================================== =============== = =========== == =========== === ===========
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