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) January 15, 1997
FLEET FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
RHODE ISLAND
(State or other jurisdiction of incorporation)
1-6366 05-0341324
(Commission File Number) (IRS Employer Identification No.)
One Federal Street, Boston, MA 02211
(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 releases attached hereto as Exhibits 99(a)
and 99(b).
Item 7. Financial Statements and Other Exhibits.
Exhibit No. Description
Exhibit 99(a) Press Release Reporting 1996 Earnings
Dated January 15, 1997
Exhibit 99(b) Press Release for Stock Repurchase
and Dispositions Dated January 15, 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/William C. Mutterperl
--------------------------------------
William C. Mutterperl
Senior Vice President and General Counsel
Dated: January 23, 1997
Exhibit 99(a)
Contacts: Media: James Mahoney Investor: Thomas R. Rice
(617) 346-5472 (617) 346-0148
FLEET FINANCIAL GROUP REPORTS
1996 EARNINGS OF $1.14 BILLION
Boston, Massachusetts, January 15, 1997: Fleet Financial Group, Inc.
(FLT-NYSE) today reported a 10% increase in net income for 1996 to $1.14
billion, or $3.95 per share, compared to earnings in 1995 of $1.04 billion, or
$3.77 per share, excluding special charges. The corporation also reported a
fourth quarter increase in net income of 16% to $302 million, or $1.05 per
share, compared with $260 million, or $.94 per share, for the fourth quarter of
1995, excluding special charges. Return on assets and return on common equity
for 1996 were 1.37% and 17.43%, respectively. Revenues for the year were $5.5
billion and $1.4 billion for the fourth quarter, an increase of 15% from both
comparable periods of 1995.
In a separate news release, Fleet announced today that the company's board
of directors approved the repurchase of up to 20 million shares of common stock
and the disposition of its Option One Mortgage Company, indirect auto lending,
and corporate trust business units.
Terrence Murray, Fleet's chairman and chief executive officer, commented,
"The fourth quarter concluded a memorable year for Fleet. Our major objectives
for 1996 were integrating Shawmut, reconfiguring our balance sheet, focusing on
customer retention and laying the groundwork for the NatWest integration. I'm
pleased to report that all of these were accomplished, while at the same time
increasing net income to over $1.1 billion."
Mr. Murray continued, "In 1996 we completed our branch reconfiguration as
planned, and converted more than 115 major systems while consolidating dozens of
internal departments. We believe we have one of the best records in the industry
on delivering quality consolidations, and the evidence of this is the strong
customer retention experienced through the consolidation process. Our customer
retention levels were much greater than what we had planned and in certain
instances attrition was nonexistent."
"We were presented a unique opportunity with Shawmut and NatWest to
restructure the Fleet balance sheet and did so with great success. The result of
this is a balance sheet which is as efficient as any in the industry. The margin
has improved substantially as loans replaced lower yielding securities and core
deposits replaced purchased funding."
"But our accomplishments extend well beyond our current earnings picture,"
Mr. Murray continued. "We're building whole new businesses in corporate finance,
insurance, and asset management by bringing new products and services to our
existing customers across the Northeast. The success of these new initiatives
demonstrates Fleet's ability to bring innovative solutions to address customers'
financial needs, and the confidence our customers have that the Fleet brand will
continue its reputation for value. These new sources of revenue, as well as the
geographic expansion of Fleet's franchise into New Jersey and metropolitan New
York, provide a solid base for earnings growth in 1997."
Return on assets and return on common equity for 1996 were 1.37% and
17.43%, respectively, up from 1.26% and 16.29% in 1995. Return on assets and
return on common equity for the fourth quarter of 1996 were 1.40% and 17.67%,
respectively, an increase over the 1.24% and 15.45% reported in the fourth
quarter of 1995.
Eugene M. McQuade, Fleet's chief financial officer, commented, "Our
financial performance continues to rank among the industry leaders and the best
of any Northeast financial institution. We believe that our already strong
profitability measures can be further improved by continuing to deliver
innovative financial solutions to our customers." McQuade also noted, "The
fundamental change in our business mix through the balance sheet restructuring
not only drove Fleet's net interest margin to the 5% level, it also strengthened
our capital position. One of the corporation's financial goals in 1996 was the
restoration of our capital ratios, diminished in mid-year by the NatWest
acquisition. We're proud to report that we have exceeded this objective."
Net interest income totaled $3.4 billion for 1996, an increase of 11%, or
approximately $375 million, from 1995. In addition, the net interest margin
improved to 4.81% in 1996 from 4.12% in 1995. These improvements reflect the
addition of higher-yielding loans and lower-cost core deposits resulting from
the acquisition of NatWest, as well as various programs to shed lower margin
assets and pay down higher-cost funding. Net interest income for the fourth
quarter of 1996 totaled $910 million an increase of 22% compared to $747 million
in the fourth quarter of 1995, reflecting the positive impact of the actions
noted above. Fourth quarter net interest margin was 5.00%, up 25% from last
year's 4.00%.
The provision for credit losses was $213 million in 1996 up $113 million
from 1995, with net chargeoffs of $370 million, up $70 million for the year. The
provision was $65 million in the fourth quarter of 1996, up $40 million from the
comparable quarter of 1995, with net charge-offs of $124 million, up $30 million
from the fourth quarter of 1995. Increased provision and charge-offs primarily
reflect the acquisition of NatWest in mid-1996.
Noninterest income in 1996 totaled $2.2 billion up $350 million, or 19%,
from $1.85 billion in 1995. Mortgage banking revenues increased $50 million over
the prior year as mortgages serviced increased to $122 billion. Investment
services revenue also increased $50 million, or 16%, over 1995, aided by a
strong equity market. Student loan servicing revenue increased $25 million, or
36%, compared to the prior year as the extension of Fleet's direct loan
servicing contracts with the federal government contributed to the increase in
the volume of loans serviced. Revenues from Fleet's venture capital business,
Fleet Private Equity, increased $70 million compared to 1995 to $106 million due
to increasing values in our equity capital investments. In the fourth quarter of
1996, noninterest income totaled $577 million compared to $526 million in the
fourth quarter of 1995, a 10% increase. The corporation showed strong growth in
many of the same businesses that showed robust performance in the full year
results.
Noninterest expense totaled $3.46 billion in 1996, which includes seven
months of NatWest expenses, compared to $3.07 billion during 1995, (1995
expenses are prior to special charges of $665 million, the result of costs
related to the Shawmut merger and charges related to business dispositions).
Excluding the impact of NatWest, noninterest expense declined 5% from 1995.
Expense reductions were realized in employee compensation and occupancy related
costs as well as several other expense categories as cost reduction initiatives
in connection with the Shawmut merger were completed. Noninterest expense
totaled $721 million for the fourth quarter of 1996, excluding $184 million
related to NatWest, compared to $814 million for the fourth quarter of 1995, an
annualized reduction of $375 million, reflecting cost reductions associated with
Shawmut merger initiatives. During the quarter, the consolidation of Shawmut was
substantially completed and the corporation's goal of achieving $400 million of
cost savings on an annualized basis has been achieved.
Total assets at December 31, 1996 were $85.5 billion, relatively unchanged
from $84.4 billion a year ago. However, the composition of earning assets and
funding sources has become significantly more productive due to the NatWest
acquisition and related balance sheet restructuring actions. Total loans were up
14% during the year to $59 billion. This loan growth primarily resulted from the
NatWest acquisition as well as growth in the corporation's credit card
portfolio. Nonperforming assets decreased to $723 million from $759 million at
September 30, 1996. Stockholders' equity amounted to $7.42 billion at December
31, 1996, an increase of $1.1 billion from December 31, 1995, due primarily to
the issuance of $600 million of preferred stock in connection with the NatWest
acquisition. During the quarter the corporation redeemed its $50 million 9.375%
Series IV preferred stock as well as issued $250 million of Trust Preferred
Stock.
The corporation's capital position has improved since the consummation of
the NatWest acquisition as a result of over $1 billion in earnings and the
corporation's continued efforts to shed low margin assets. The corporation's
common equity to assets ratio has increased from 7% at June 30, 1996 to 7.6% at
December 31, 1996, and the corporation's tangible common equity to total assets
ratio has improved from 5% at June 30, 1996 to 5.7% at December 31, 1996.
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<TABLE>
<CAPTION>
FLEET FINANCIAL GROUP
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED TWELVE MONTHS ENDED
Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
1996 1996 1995 1996 1995
For the Period ($ in millions)
<C> <C> <C> <C> <C>
$ 302 $ 295 $ (138) Net income (loss) $ 1,139 $ 610
302 295 260 Net income excluding special charges 1,139 1,039
910 934 747 Net interest income (a) 3,439 3,064
65 65 26 Provision for credit losses 213 101
Per Common Share
$ 1.05 $ 1.02 $ (1.17) Fully diluted earnings per share (loss) $ 3.95 $ 1.57
1.05 1.02 0.94 Fully diluted earnings excluding special charges 3.95 3.77
49.88 44.50 40.75 Market value (period-end) 49.88 40.75
0.45 0.43 0.43 Cash dividends declared 1.74 1.63
24.66 23.90 22.71 Book value (period-end) 24.66 22.71
At Quarter End ($ in billions)
$ 85.5 $ 87.2 $ 84.4 Assets $ 85.5 $ 84.4
58.8 60.1 51.5 Loans and leases 58.8 51.5
67.1 67.6 57.1 Deposits 67.1 57.1
7.4 7.3 6.4 Total stockholders' equity 7.4 6.4
Operating Ratios
1.40% 1.35% 1.24%(c)Return on average assets 1.37% 1.26% (c)
17.67 17.83 15.45(c) Return on common equity 17.43 16.29 (c)
17.77 17.69 15.52(c) Return on realized common equity (b) 17.42 16.17 (c)
5.00 5.01 4.00 Net interest margin 4.81 4.12
8.7 8.3 7.5 Total equity/assets (period-end) 8.7 7.5
7.6 7.1 7.6 Tier 1 risk-based capital ratio (estimated) 7.6 7.6
11.3 10.8 11.3 Total risk-based capital ratio (estimated) 11.3 11.3
Asset Quality ($ in millions)
$1,488 $ 1,548 $ 1,321 Reserve for credit losses $ 1,488 $ 1,321
723 759 499 Nonperforming assets 723 499
Nonperforming assets as a % of loans, leases,
1.23% 1.26% 0.97% and OREO 1.23% 0.97%
0.85 0.87 0.59 Nonperforming assets as a % of total assets 0.85 0.59
1.18 1.18 0.85 Nonperforming loans to period-end loans 1.18 0.85
2.53 2.58 2.56 Reserve for credit losses to period-end loans 2.53 2.56
0.83 0.74 0.72 Net charge-offs/average loans 0.66 0.59
(a) Fully taxable equivalent
(b) Excludes average unrealized gains/losses on securities available for sale
(c) Does not include the effect of the loss on assets held for sale or
accelerated disposition or merger related charges. Including these special
charges, return on average assets, return on common equity and return on
realized common equity ratios were (.66%), (9.10%) and (9.14%),
respectively for the quarter and .74%, 9.32% and 9.25%, respectively
for the year.
</TABLE>
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<TABLE>
<CAPTION>
FLEET FINANCIAL GROUP
CONSOLIDATED INCOME STATEMENTS
($ in millions)
THREE MONTHS ENDED TWELVE MONTHS ENDED
------------ ------------ ------------ ------------- ----------
Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
1996 1996 1995 1996 1995
------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
$ 910 $ 934 $ 747 Net interest income (FTE) $ 3,439 $ 3,064
65 65 26 Provision for credit losses 213 101
845 869 721 Net interest income after provision 3,226 2,963
Noninterest income:
160 169 120 Service charges, fees, and commissions 592 486
157 146 131 Mortgage banking 560 511
98 93 84 Investment services revenue 372 322
31 23 25 Student loan servicing fees 98 72
131 124 166 Other 579 464
577 555 526 Total noninterest income 2,201 1,855
Noninterest expense:
423 425 348 Employee compensation and benefits 1,607 1,448
88 90 118 Mortgage servicing and intangible
asset amortization 323 294
74 74 63 Occupancy 284 250
71 71 55 Equipment 266 209
249 251 230 Other 980 874
905 911 814 Total noninterest expense 3,460 3,075
517 513 433 Earnings before income taxes 1,967 1,743
215 218 173 Income taxes and tax-equivalent adjustment 828 704
$ 302 $ 295 $ 260 Earnings before special charges $ 1,139 $ 1,039
0 0 398 Special charges, net of tax 0 429
$ 302 $ 295 $ (138) Net income (loss) $ 1,139 $ 610
</TABLE>
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<TABLE>
<CAPTION>
FLEET FINANCIAL GROUP
CONSOLIDATED BALANCE SHEETS
($ in millions)
------- -------- -------
Dec 31, Sept 30, Dec 31,
1996 1996 1995
------- ------- ------
ASSETS:
<S> <C> <C> <C>
Cash and cash equivalents $ 9,015 $ 5,954 $ 4,566
Securities 8,680 11,733 19,331
Loans and lease financing 58,844 60,086 51,525
Reserve for credit losses (1,488) (1,548) (1,321)
Mortgages held for resale 1,560 1,555 2,005
Other assets 8,907 9,414 8,326
Total assets $ 85,518 $87,194 $84,432
LIABILITIES:
Deposits:
Demand $ 17,903 $ 17,505 $ 12,305
Regular savings, NOW, money market 27,976 28,475 22,835
Time 21,192 21,573 21,982
Total deposits 67,071 67,553 57,122
Short-term borrowings 3,627 5,117 12,569
Long-term debt 4,864 4,923 6,481
Other liabilities 2,291 2,333 1,895
Total liabilities 77,853 79,926 78,067
Trust Issued Preferred Securities 250 - -
STOCKHOLDERS' EQUITY:
Preferred stock 953 1,001 399
Common stock 6,462 6,267 5,966
Total stockholders' equity 7,415 7,268 6,365
Total liabilities and stockholders' equity $ 85,518 $ 87,194 $ 84,432
</TABLE>
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<TABLE>
<CAPTION>
FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ in millions)
THREE MONTHS ENDED
December 31, 1996 September 30, 1996 December 31, 1995
Average Average Average
Balance Rate Balance Rate Balance Rate
ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Securities $ 10,261 6.71 % $ 11,838 6.58 % $ 19,457 6.15 %
Loans and leases 59,256 8.58 59,536 8.66 52,451 8.78
Mortgages held for resale 1,569 8.20 1,676 8.16 2,099 7.56
Other earning assets 1,462 4.87 1,247 7.65 644 5.76
Total interest-earning assets 72,548 8.23 % 74,297 8.30 % 74,651 8.04 %
Reserve for credit losses (1,546) (1,595) (1,433)
Other assets 14,827 14,101 10,341
Total assets $ 85,829 $ 86,803 $ 83,559
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Savings $ 28,225 2.30 % $ 28,589 2.33 % $ 22,661 2.64 %
Time 21,622 5.36 22,170 5.36 21,006 5.73
Total interest-bearing deposits 49,847 3.63 50,759 3.66 43,667 4.13
Short-term borrowings 3,903 4.47 4,512 5.04 13,686 5.42
Long-term debt 4,940 7.24 5,063 7.18 6,647 7.13
Total interest-bearing
liabilities $ 58,690 3.99 % $ 60,334 4.06 % $ 64,000 4.72 %
Net interest spread 4.24 % 4.24 % 3.32 %
Demand deposits $ 16,808 $ 16,934 $ 11,284
Other liabilities 2,961 2,406 1,451
Total liabilities 78,459 79,674 76,735
Stockholders' equity 7,370 7,129 6,824
Total liabilities and stockholders'
equity $ 85,829 $ 86,803 $ 83,559
Net interest margin 5.00 % 5.01 % 4.00 %
</TABLE>
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<TABLE>
<CAPTION>
FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ in millions)
TWELVE MONTHS ENDED
December 31, 1996 December 31, 1995
Average Average
Balance Rate Balance Rate
ASSETS:
<S> <C> <C> <C> <C>
Securities $ 11,425 6.45 % $ 20,594 6.18 %
Loans and leases 56,074 8.61 51,043 9.03
Mortgages held for resale 1,878 7.87 1,459 7.96
Other earning assets 2,120 7.75 1,084 5.74
Total interest-earning assets 71,497 8.22 % 74,180 8.17 %
Reserve for credit losses (1,493) (1,489)
Other assets 13,120 10,036
Total assets $ 83,124 $ 82,727
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Savings $ 26,363 2.33 % $ 22,987 2.57 %
Time 20,971 5.44 20,133 5.64
Total interest-bearing deposits 47,334 3.70 43,120 4.00
Short-term borrowings 5,844 5.05 14,046 5.69
Long-term debt 5,486 7.10 6,581 7.26
Total interest-bearing liabilities $ 58,664 4.16 % $ 63,747 4.71 %
Net interest spread 4.06 % 3.46 %
Demand deposits 15,042 10,910
Other liabilities 2,397 1,525
Total liabilities 76,103 76,182
Stockholders' equity 7,021 6,545
Total liabilities and stockholders' equity $ 83,124 $ 82,727
Net interest margin 4.81 % 4.12 %
</TABLE>
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Exhibit 99(b)
FOR IMMEDIATE RELEASE Contact: James E. Mahoney
(617) 346-5472
FLEET ANNOUNCES PLAN FOR STOCK REPURCHASE AND STRATEGIC
DISPOSITION OF THREE BUSINESS UNITS
BOSTON, Massachusetts, January 15, 1997 -- Fleet Financial Group today
announced a stock repurchase plan and a strategic disposition plan for three of
its business units.
The company's board of directors today approved the repurchase of up to 20
million shares of common stock and disposition of its Option One Mortgage
Company, indirect auto lending, and corporate trust business units.
"Today's announcements are part of Fleet's continuing efforts to focus on
our core businesses," said Fleet's Chairman and CEO Terrence Murray. "Over the
past year, we have reviewed each of our business lines in terms of their ability
to provide relevant financial solutions for our customers and to make meaningful
contributions to shareholder value. In 1996 we sold two business units as part
of this strategic review - Fleet Finance and Fleet Real Estate Capital - and
today we are announcing the disposition of an additional three business units."
As part of the continuing refinement of Fleet's business strategy and
efficient use of capital resources, Fleet's board of directors authorized the
repurchase of up to 20 million shares of common stock over the next twelve
months. "The stock repurchase authorization is intended to facilitate improved
capital management as Fleet generates additional capital through continuing
earnings." Murray said.
Fleet announced its intention to sell three business units: Option One
Mortgage Corporation, Fleet's indirect auto lending portfolio, and Fleet's
corporate trust unit.
* Option One Mortgage Corporation originates and services residential
mortgages nationwide. The company originated approximately $1 billion
in loans in 1996 and services approximately 20,000 accounts totaling
$1.9 billion. The unit has eleven branches and more than 20 satellite
offices serving a national network of more than 1,000 mortgage
brokers. Option One was established in 1992 as a wholly-owned
subsidiary of Plaza Home Mortgage Corporation. Fleet acquired the
company in March of 1995 as part of its purchase of Plaza Home
Mortgage Corporation.
* Fleet's indirect auto lending portfolio - a business unit with $1.7
billion in assets which provides new and used car financing,
originated by auto dealers in New England, New York, and New Jersey. *
* Fleet's corporate trust unit - Nationally, Fleet is one of the top ten
corporate trust providers and one of the top five trustees for
high-yield debt issues. The corporate trust unit generates revenue of
$20-25 million per year and is the leading trustee for tax-exempt
issues in New England.
Pending completion of the sales, Fleet will continue to service all
customers of these business units and work to assure a successful transition.
Stock repurchases may be implemented through a variety of methods,
including open market share repurchases, block transactions, privately
negotiated share repurchases, accelerated share repurchase programs, forward
repurchase agreements, or other similar facilities. Such repurchases will be
based on management's assessment of Fleet's capital structure and liquidity, the
market price of Fleet's common stock compared to management's assessment of the
stock's underlying value, as well as regulatory, accounting and other factors
that management deems appropriate.
Boston-based Fleet Financial Group is an $85-billion, diversified financial
services company listed on the New York Stock Exchange (NYSE: FLT). In addition
to student loan lending and student loan processing, Fleet's lines of business
include consumer and commercial banking, investment management, mortgage
lending, government banking and asset-based lending.
