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 16, 1997
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FLEET FINANCIAL GROUP, INC.
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(Exact name of registrant as specified in its charter)
RHODE ISLAND
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(State or other jurisdiction of incorporation)
1-6366 05-0341324
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(Commission File Number) (IRS Employer Identification No.)
One Federal Street, Boston, MA 02211
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-292-2000
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
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Pursuant to Form 8-K, General Instructions F, Registrant hereby
incorporates by reference the press release attached hereto as Exhibit 99(a).
Item 7. Financial Statements and Other Exhibits.
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Exhibit No. Description
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Exhibit 99(a) Press Release Reporting Second Quarter
1997 Earnings - dated July 16, 1997
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/Robert C. Lamb, Jr.
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Robert C. Lamb, Jr.
Controller and Chief Accounting Officer
Dated: July , 1997
Exhibit 99(a)
Contacts: Media: James Mahoney Investor: Thomas R. Rice
(617) 346-5472 (617) 346-0148
T. Kevin Beatty
(617) 346-4963
FLEET FINANCIAL GROUP REPORTS SECOND QUARTER
NET INCOME OF $328 MILLION
EARNINGS PER SHARE UP 24% TO $1.19
ROA 1.61% ROE 20.2%
BOSTON, Mass., July 16, 1997 - Fleet Financial Group, Inc. (FLT-NYSE) today
reported net income of $328 million for the second quarter of 1997, an increase
of $50 million from the second quarter of 1996. Earnings per share were $1.19
for the quarter or 24% higher than the $.96 per share reported in last year's
second quarter. Return on assets and return on equity for the quarter were 1.61%
and 20.24%, respectively, compared with 1.32% and 17.20%, respectively, for the
second quarter of 1996.
Cash basis results continue to outpace reported results as earnings per
share were $1.29 in the second quarter, while return on assets and return on
equity were 1.77% and 28.67%, respectively. Cash basis results exclude the
impact of certain nonqualifying intangible assets and their amortization created
as the result of acquisition activity.
Net income for the six months of 1997 was $639 million, an increase of $97
million from the first half of 1996. Earnings per share were $2.28 for the first
half of 1997, an increase of 21%, compared with $1.89 earned in the first half
of 1996. Return on assets and return on equity for the six months of 1997 were
1.56% and 19.52%, respectively, compared with 1.36% and 17.09%, respectively,
for the first half of 1996.
Highlights
"This was a watershed quarter for Fleet," said Terrence Murray, Fleet's
chairman and chief executive officer, "Fleet made a number of bold promises to
the market 18 months ago. We envisioned the creation of one of the country's
finest financial services franchises with our employees stepping up to the
challenges of integrating two of the largest acquisitions in U.S. banking,
capturing $600 million in cost savings, and dramatically restructuring Fleet's
balance sheet. Today that vision is a reality."
"The effective execution of this ambitious strategy has created tangible
value for Fleet's shareholders," Mr. Murray observed. "With a return on equity
in excess of 20% and a return on assets in excess of 1.6%, Fleet's performance
measurements are solidly positioned among the true leaders of the industry. With
a current market capitalization of almost $17 billion, Fleet has delivered
nearly $6 billion of increased shareholder value since closing on the
acquisition of Shawmut in late 1995. Earnings per share growth of 24% over the
past year is an additional source of pride as well as an objective measure of
the magnitude of these accomplishments."
"Toward the end of the second quarter we announced the completion of our
integrations of Shawmut and NatWest and the achievement of our cost savings
target of $600 million. These completed integrations have created a unique
position for Fleet in the northeast. With Fleet's common technology platform
fully installed, a Fleet customer can walk into any of our over 1,200 branches,
in any of the seven states served by Fleet, and conduct business as if it were
their branch around the corner. No other bank provides this caliber of service
in this market. Fleet has certainly delivered on its promises," concluded Mr.
Murray.
Eugene M. McQuade, vice chairman and chief financial officer, provided
additional detail on the strong results in Fleet's second quarter, "Fleet has
made extraordinary progress over the last six quarters during which two major
acquisitions were integrated into our operations and our balance sheet was
restructured. Cost savings of $700 million have been captured, the efficiency
ratio has improved to 55.8% and our net interest margin has risen over 30% to
5.25%."
Second quarter results include one-time charges totaling $155 million.
Included among these special charges was $125 million for investments to
maintain Fleet's position at the forefront of banking technology and $30 million
to reengineer selected back office operations to improve responsiveness, service
quality, and efficiency through the use of new technology. In addition, the
corporation reported net gains of $175 million from the sale of three
businesses: Option One (the corporation's non-conforming mortgage banking
subsidiary), Corporate Trust and Indirect Auto Lending. Also of note in the
quarter was an $18 million increase from the first quarter in the provision for
loan losses.
Strong annualized loan growth of 9%, excluding the impact of the previously
announced sale of three business units, contributed to the record performance in
the quarter. New loan growth of more than $1.4 billion was primarily
attributable to the commercial loan portfolio which increased by $1.2 billion.
Reflected in the corporation's balance sheet at June 30, 1997 is a reduction of
$2.2 billion of indirect auto and floorplan loans which were contracted to be
sold at the end of the quarter.
Second Quarter Results
Net interest income totaled $916 million, an increase of $53 million, or
6%, from the second quarter of 1996. The increase is principally attributable to
the acquisition of NatWest on May 1, 1996, and an increasing net interest
margin. The Corporation reported a net interest margin of 5.25%, an increase of
almost 50 basis points, reflecting the continuing impact of a comprehensive
balance sheet restructuring program which lowered funding costs and enhanced the
Corporation's earning asset mix.
The provision for credit losses was $83 million, a $35 million increase
from the prior year's second quarter. Net charge-offs amounted to $102 million,
a $27 million increase from the second quarter of 1996, primarily the result of
the inclusion of NatWest for the entire quarter. Nonperforming assets of $531
million in the second quarter decreased $173 million from March 31, 1997. The
reserve for loan losses remained relatively stable at $1.4 billion. At this
level, the loan loss reserve is 2.5% of total loans and almost 3 times
nonperforming loans.
Noninterest income on an operating basis totaled $514 million, (excluding
gains of $175 million on the aforementioned sales of business units) an increase
of $45 million, or nearly 10%, when compared to $469 million for the same period
in 1996 (excluding $32 million of branch divestiture gains). The corporation
experienced growth in all major core noninterest revenue categories.
Noninterest expense declined $40 million from the first quarter of 1997 to
$797 million (excluding $155 million of special charges). The expense reductions
resulted from the effective integrations of NatWest and Shawmut, two significant
consolidations undertaken and completed in a period of time notably quicker than
industry standards. The company exceeded its $600 million of cost saves
estimated at the time of these two acquisitions by $100 million. The effect of
these reductions and the aforementioned revenue growth have combined to improve
the company's efficiency ratio to 55.8%.
Total assets at June 30, 1997 were $83.4 billion compared to $85.5 billion
of total assets at December 31, 1996. Stockholders' equity amounted to $7.0
billion at June 30, 1997. During the quarter, the corporation repurchased 5
million common shares bringing the total number of shares repurchased this year
to 11.9 million.
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FLEET FINANCIAL GROUP
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, March 31, June 30, June 30, June 30,
1997 1997 1996 1997 1996
For the Period ($ in millions)
<S> <C> <C> <C> <C> <C>
Net income $ 328 $ 311 $ 278 $ 639 $ 542
Total Revenue 1,430 (c) 1,428 1,364 2,858 (c) 2,574
Total Expense 797 (c) 840 837 1,638 (c) 1,554
Provision for credit losses 83 65 48 148 84
Per Common Share
Fully diluted earnings per share $ 1.19 $ 1.10 $ 0.96 $ 2.28 $ 1.89
Market value (period-end) 63.25 57.13 43.50 63.25 43.50
Cash dividends declared 0.45 0.45 0.43 0.90 0.86
Book value (period-end) 24.64 24.34 23.25 24.64 23.25
At Quarter End ($ in billions)
Assets $ 83.4 $ 81.7 $ 87.7 $ 83.4 $ 87.7
Loans and leases 58.2 (b) 59.1 59.1 58.2 (b) 59.1
Deposits 63.2 64.1 68.1 63.2 68.1
Total stockholders' equity 7.0 7.1 7.1 7.0 7.1
Operating Ratios
Return on average assets 1.61 % 1.52 % 1.32 % 1.56 1.36 %
Return on common equity 20.24 18.82 17.20 19.52 17.09
Return on realized common equity (a) 20.23 18.87 17.08 19.55 17.08
Net interest margin 5.25 5.16 4.76 5.21 4.60
Efficiency ratio 55.8 (c) 58.8 61.4 57.3 (c) 60.4
Total equity/assets (period-end) 8.4 8.7 8.1 8.4 8.1
Tier 1 risk-based capital ratio (estimated) 7.2 7.6 7.0 7.2 7.0
Total risk-based capital ratio (estimated) 10.8 11.3 10.9 10.8 10.9
Asset Quality ($ in millions)
Nonperforming assets $ 531 $ 704 $ 745 $ 531 $ 745
Reserve for credit losses 1,443 1,462 1,597 1,443 1,597
Nonperforming assets as a % of loans, leases,
and OREO 0.91 % 1.19 % 1.26 % 0.91 % 1.26 %
Nonperforming assets as a % of total assets 0.64 0.86 0.85 0.64 0.85
Nonperforming loans to period-end loans 0.86 1.14 1.17 0.86 1.17
Reserve for credit losses to period-end loans 2.48 2.48 2.70 2.48 2.70
Net charge-offs/average loans 0.69 0.61 0.54 0.65 0.51
(a) Excludes average unrealized gains/losses on securities available for sale
(b) Excludes $2.2 billion of indirect auto loans which have been reclassified to
other assets due to the pending sale of this business unit
(c) Excludes net gains on sales of business units and special charges
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FLEET FINANCIAL GROUP
CONSOLIDATED INCOME STATEMENTS
($ in millions)
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, March 31, June 30, June 30, June 30,
1997 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C>
Net interest income (FTE) $ 916 $ 902 $ 863 $ 1,818 $ 1,595
Provision for credit losses 83 65 48 148 84
Net interest income after provision 833 837 815 1,670 1,511
Noninterest income:
Service charges, fees, and commissions 159 157 130 316 238
Investment services revenue 103 103 93 206 181
Mortgage banking, net of amortization 91 104 85 194 167
Student loan servicing fees 26 26 22 52 44
Other 135 136 171 272 349
Subtotal noninterest income 514 526 501 1,040 979
Gains on the sales of business units 175 - - 175 -
Total noninterest income 689 526 501 1,215 979
Noninterest expense:
Employee compensation and benefits 406 425 411 831 758
Occupancy 67 75 75 141 136
Equipment 67 70 68 137 125
Intangible asset amortization 39 39 30 79 56
Other 218 231 253 450 479
Subtotal noninterest expense 797 840 837 1,638 1,554
Special charges 155 - - 155 -
Total noninterest expense 952 840 837 1,793 1,554
Earnings before income taxes 570 523 479 1,092 936
Income taxes and tax-equivalent adjustment 242 212 201 453 394
Net income $ 328 $ 311 $ 278 $ 639 $ 542
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FLEET FINANCIAL GROUP
CONSOLIDATED BALANCE SHEETS
($ in millions)
June 30, March 31, June 30,
1997 1997 1996
ASSETS:
Cash and cash equivalents $ 6,057 $ 5,309 $ 7,048
Securities 8,704 8,557 11,415
Loans and lease financing 58,186(a) 59,054 59,093
Reserve for credit losses (1,443) (1,462) (1,597)
Mortgages held for resale 1,000 1,334 1,860
Other assets 10,897 8,900 9,909
Total assets 83,401 $ 81,692 $ 87,728
LIABILITIES:
Deposits:
Demand $ 16,471 $ 16,089 $ 17,527
Regular savings, NOW, money market 27,641 27,738 28,801
Time 19,117 20,312 21,817
Total deposits 63,229 64,139 68,145
Short-term borrowings 5,786 3,579 4,637
Long-term debt 4,550 4,617 5,303
Other liabilities 2,818 2,260 2,516
Total liabilities 76,383 74,595 80,601
STOCKHOLDERS' EQUITY:
Preferred stock 835 869 1,003
Common stock 6,183 6,228 6,124
Total stockholders' equity 7,018 7,097 7,127
Total liabilities and stockholders' equity $ 83,401 $ 81,692 $ 87,728
(a) Excludes $2.2 billion of indirect auto loans which have been reclassified
to other assets due to the pending sale of this business unit.
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FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ in millions)
THREE MONTHS ENDED
June 30, 1997 March 31, 1997 June 30, 1996
Average Average Average
Balance Rate Balance Rate Balance Rate
ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Securities $ 8,327 6.72% $ 8,580 6.67% $ 11,481 6.32%
Loans and leases 59,027 8.67 58,669 8.63 55,935 8.58
Mortgages held for resale 1,444 7.91 1,686 7.59 2,190 7.79
Other earning assets 1,182 4.81 1,575 4.91 3,242 8.20
Total interest-earning assets 69,980 8.37% 70,510 8.29% 72,848 8.18%
Reserve for credit losses (1,457) (1,488) (1,510)
Other assets 13,281 13,864 13,442
Total assets $ 81,804 $ 82,886 $ 84,780
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Savings $ 27,611 2.22% $ 27,779 2.25% $ 26,494 2.25%
Time 20,005 5.09 20,715 5.13 20,920 5.43
Total interest-bearing
deposits 47,616 3.43 48,494 3.48 47,414 3.65
Short-term borrowings 4,357 4.84 3,608 4.35 6,941 5.10
Long-term debt 4,611 7.33 5,003 7.17 5,871 7.10
Total interest-bearing
liabilities $ 56,584 3.86% $ 57,105 3.87% $ 60,226 4.15%
Net interest spread 4.51% 4.42% 4.03%
Demand deposits and other
noninterest-bearing time
deposits $ 16,161 $ 16,197 $ 15,218
Other liabilities 2,027 2,354 2,296
Total liabilities 74,772 75,656 77,740
Stockholders' equity 7,032 7,230 7,040
Total liabilities and
stockholders' equity $ 81,804 $ 82,886 $ 84,780
Net interest margin 5.25% 5.16% 4.76%
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FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ in millions)
SIX MONTHS ENDED
June 30, 1997 June 30, 1996
Average Average
Balance Rate Balance Rate
ASSETS:
<S> <C> <C> <C> <C>
Securities $ 8,451 6.70% $ 11,697 6.31%
Loans and leases 58,849 8.65 52,716 8.60
Mortgages held for resale 1,565 7.74 2,138 7.64
Other earning assets 1,377 4.86 3,004 8.21
Total interest-earning assets 70,242 8.33% 69,555 8.17%
Reserve for credit losses (1,473) (1,414)
Other assets 13,573 11,762
Total assets $ 82,342 $ 79,903
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Savings $ 27,694 2.24% $ 24,295 2.34%
Time 20,358 5.11 20,036 5.52
Total interest-bearing deposits 48,052 3.46 44,331 3.78
Short-term borrowings 3,985 4.62 7,500 5.21
Long-term debt 4,806 7.21 5,976 7.01
Total interest-bearing liabilities $ 56,843 3.86% $ 57,807 4.30%
Net interest spread 4.47% 3.87%
Demand deposits and other noninterest-
bearing time deposits $ 16,179 $ 13,199
Other liabilities 2,189 2,106
Total liabilities 75,211 73,112
Stockholders' equity 7,131 6,791
Total liabilities and stockholders' equity $ 82,342 $ 79,903
Net interest margin 5.21% 4.60%
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