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) April 15, 1998
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 release attached hereto as Exhibit 99.
Item 7. Financial Statements and Other Exhibits.
Exhibit No. Description
99 Fleet Financial Group, Inc. Press Release
Dated April 15, 1998
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.
----------------------------
Robert C. Lamb, Jr.
Controller
Chief Accounting Officer
Dated: April 15, 1998
Contacts: Media: James Mahoney Investor: Thomas R. Rice
(617) 346-5472 (617) 346-0148
T. Kevin Beatty
(617) 346-4963
FLEET FINANCIAL GROUP
OPERATING EARNINGS RISE 10 PERCENT TO $367 MILLION
Boston, Massachusetts, April 15, 1998: Fleet Financial Group, Inc.
(FLT-NYSE) today reported operating earnings of $367 million, or $1.21 per
diluted share, for the first quarter of 1998, a 10% increase compared with $334
million, or $1.10 per diluted share, earned in the first quarter of 1997. Return
on assets and return on common equity for the first quarter of 1998 were 1.62%
and 18.27%, respectively.
During the quarter, the Corporation completed the acquisitions of The Quick
& Reilly Group, Inc. and the consumer credit card operations of Advanta
Corporation. Financial data for all prior periods has been restated to reflect
the pooling of Fleet and Quick & Reilly. The financial results of Advanta,
accounted for as a purchase, are included subsequent to February 20, 1998, the
date of close. Net income for the first quarter of 1998, including the impact of
merger-related charges relating to these acquisitions, was $323 million, or
$1.06 per diluted share.
Terrence Murray, Fleet's chairman and chief executive officer, commented on
Fleet's accomplishments during the quarter, "With the acquisition of Quick &
Reilly and Advanta's consumer credit card operations, Fleet materially advanced
its capabilities in serving the increasingly sophisticated financial needs of
our customers and communities. From a shareholder point of view, these
businesses make an immediate contribution to Fleet's revenue growth and will
accelerate earnings performance for the year."
Eugene M. McQuade, vice chairman and chief financial officer, commented,
"Noninterest income grew in excess of $80 million in the past twelve months,
moving us toward our goal of bringing a better balance to the corporation's
overall revenue mix. This growth reflects strong performances at both Quick &
Reilly and Advanta, as well as our investment services business which had a 68%
increase in assets under management over the past year."
Asset quality continued to improve in all aspects of the Corporation's loan
portfolio as nonperforming assets decreased nearly 50% in the past year to $373
million at the end of the first quarter. Net charge-offs and the provision for
credit losses were both $92 million in the first quarter. The reserve for loan
losses is $1.55 billion at March 31, 1998 and represents 2.39% of total loans
and 441% of nonperforming loans.
Financial Highlights
Net interest income totaled $938 million during the first quarter of 1998,
an increase of $20 million from the first quarter of 1997. The increase is
principally attributable to strong growth in Fleet's earning assets and
increased loan fees. The Corporation reported a net interest margin of 4.75%
which reflected the impact of lower-yielding assets acquired with both Advanta
and Quick & Reilly.
Noninterest income in the first quarter totaled $695 million, an increase
of $82 million, or 13%, from the same period in 1997. Investment services
revenue has increased 14% to $201 million in the first quarter driven by a
strong equity market, a $33 billion growth in assets under management, partially
attributable to the acquisition of Columbia Management late in 1997, and
increased sales of mutual fund and annuity products. Capital markets revenue,
excluding securities gains, climbed 50% to $87 million in comparison to the
first quarter of 1997 as market-making revenue derived from the company's
discount brokerage firm has nearly doubled, while venture capital revenue
increased 67% to $30 million. Credit card revenue increased $42 million over the
prior year's first quarter which is attributable to the Advanta acquisition.
As a result of the sharply decreasing interest-rate environment, the
Corporation's mortgage banking business experienced a strong acceleration in
mortgage prepayments this quarter. To recognize this, the Corporation
established a $75 million charge against the value of the investment in this
business. Because of the anticipated volatility of this asset, the Corporation
protects itself against a decrease to net income through various hedging
strategies. As a result of these strategies, the Corporation was able to fully
offset the impact of this charge through the recognition of $50 million in gains
from the securities portfolio, which had a substantial increase in value in this
interest rate environment, and $25 million of gains from the sales of mortgage
servicing.
Noninterest expense in the first quarter of 1998, excluding merger-related
charges, totaled $924 million, an increase of only $20 million, or 2.2%, from
the first quarter of 1997, despite the additions of Advanta and Columbia
Management. Notable declines were realized in several categories, including
employee compensation and occupancy expenses as the Corporation continues to
tightly manage its expense levels.
Total assets at March 31, 1998 were $97.7 billion, including total loans of
$65.0 billion, compared with $91.0 billion of total assets and $62.6 billion of
loans at December 31, 1997. Stockholders' equity amounted to $8.6 billion at
March 31, 1998.
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FLEET FINANCIAL GROUP
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED (a)
March 31, March 31,
1998 1997
For the Period ($ in millions)
<S> <C> <C>
Net income - operating basis $ 367 $ 334
Total Revenue 1,633 1,531
Total Expense 924 904
Provision for credit losses 92 65
Per Common Share
Basic earnings per share $ 1.25 $ 1.13
Diluted earnings per share 1.21 1.10
Market value (period-end) 85.06 57.13
Cash dividends declared 0.49 0.45
Book value (period-end) 27.91 23.74
At Quarter End ($ in billions)
Assets $ 97.7 $ 85.8
Loans 65.0 60.1
Deposits 68.2 64.1
Total stockholders' equity 8.6 7.5
Operating Ratios
Return on average assets 1.62% 1.56%
Return on common equity 18.27 19.17
Net interest margin 4.75 4.99
Efficiency ratio 56.6 59.1
Total equity/assets (period-end) 8.8 8.7
Tier 1 risk-based capital ratio 6.4 7.6
Total risk-based capital ratio 10.4 11.2
Asset Quality ($ in millions)
Nonperforming assets $ 373 $ 704
Reserve for credit losses 1,553 1,462
Nonperforming assets as a % of loans + OREO 0.57% 1.17%
Nonperforming assets as a % of total assets 0.38 0.82
Nonperforming loans to period-end loans 0.54 1.12
Reserve for credit losses to period-end loans 2.39 2.43
Reserve for credit losses to nonperforming loans 441 217
Net charge-offs/average loans 0.60 0.61
(a) Excludes merger-related charges of $44 million for the first quarter of 1998.
Including merger-related charges, financial data and ratios were as follows:
Net Income $ 323
Total Expenses 997
Basic earnings per share 1.09
Diluted earnings per share 1.06
Return on average assets 1.43%
Return on common equity 16.00
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<CAPTION>
FLEET FINANCIAL GROUP
CONSOLIDATED INCOME STATEMENTS
($ IN MILLIONS)
THREE MONTHS ENDED
March 31, December 31, March 31,
1998 1997 1997
<S> <C> <C> <C>
Net interest income (FTE) $ 938 $ 944 $ 918
Provision for credit losses 92 90 65
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Net interest income after provision 846 854 853
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Noninterest income:
Investment services revenue 201 188 176
Banking fees and commissions 178 176 175
Capital markets revenue 138 88 71
Processing-related revenue 59 101 142
Credit card revenue 56 17 14
Other 63 54 35
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Total noninterest income 695 624 613
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Noninterest expense:
Employee compensation and benefits 445 422 459
Equipment 80 81 79
Occupancy 74 74 77
Intangible asset amortization 51 44 41
Other 274 266 248
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Total noninterest expense 924 887 904
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Earnings before income taxes and merger-related charges 617 591 562
Income taxes and tax-equivalent adjustment 250 235 228
- ----------------------------------------------------------------------------------------
Net income before merger-related charges 367 356 334
Merger-related charges, net of tax 44 22 -
- ----------------------------------------------------------------------------------------
Net income $ 323 $ 334 $ 334
- ----------------------------------------------------------------------------------------
Basic earnings per share, excluding merger-related
charges $ 1.25 $ 1.25 $ 1.13
Diluted earnings per share, excluding merger-related
charges 1.21 1.21 1.10
Basic earnings per share 1.09 1.17 1.13
Diluted earnings per share 1.06 1.13 1.10
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<CAPTION>
FLEET FINANCIAL GROUP
CONSOLIDATED BALANCE SHEETS
($ IN MILLIONS)
March 31, December 31, March 31,
1998 1997 1997
ASSETS:
<S> <C> <C> <C>
Cash and equivalents $ 5,493 $ 5,574 $ 5,399
Securities 11,279 9,362 8,557
Loans 64,986 62,565 60,071
Reserve for credit losses (1,553) (1,432) (1,462)
Due from brokers/dealers 3,567 3,510 2,618
Mortgages held for resale 2,416 1,526 1,334
Other assets 11,499 9,942 9,307
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Total assets $ 97,687 $ 91,047 $ 85,824
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LIABILITIES:
Deposits $ 68,165 $ 63,735 $ 64,139
Short-term borrowings 8,238 7,505 4,145
Due to brokers/dealers 4,433 4,316 3,080
Long-term debt 5,095 4,500 4,617
Other liabilities 3,136 2,539 2,371
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Total liabilities 89,067 82,595 78,352
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STOCKHOLDERS' EQUITY:
Preferred stock 691 691 869
Common stock 7,929 7,761 6,603
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Total stockholders' equity 8,620 8,452 7,472
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Total liabilities and stockholders' equity $ 97,687 $ 91,047 $ 85,824
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<CAPTION>
FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ in millions)
THREE MONTHS ENDED
March 31, 1998 December 31, 1997 March 31, 1997
Average Average Average
Balance Rate Balance Rate Balance Rate
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Securities $ 10,051 6.56% $ 9,095 6.74% $ 8,580 6.67%
Loans 62,603 8.66 61,274 8.70 59,687 8.63
Mortgages held for resale 1,637 7.25 1,305 7.56 1,686 7.59
Due from brokers/dealers 3,749 5.13 3,510 4.25 2,618 4.36
Other earning assets 1,025 4.99 685 4.24 1,735 5.28
- -----------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 79,065 8.15% 75,869 8.20% 74,306 8.16%
Reserve for credit losses (1,466) - (1,430) - (1,488) -
Other assets 14,235 - 13,077 - 14,200 -
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Total Assets $ 91,834 - $ 87,516 - $ 87,018 -
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Savings $ 27,429 2.37% $ 27,206 2.31% $ 27,779 2.25%
Time 21,167 5.31 19,746 5.27 20,716 5.13
- -----------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 48,596 3.65 46,952 3.55 48,495 3.48
Short-term borrowings 6,914 4.90 6,023 4.98 4,175 4.18
Due to brokers/dealers 4,564 4.83 4,316 4.07 3,080 4.19
Long-term debt 4,853 7.31 4,341 7.43 5,003 7.18
- -----------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $ 64,927 4.14% $ 61,632 4.00% $ 60,753 3.87%
Net interest spread - 4.01% - 4.20% - 4.29%
Demand deposits and other noninterest-
bearing time deposits $ 15,844 - $ 15,700 - $ 16,196 -
Other liabilities 2,501 - 2,385 - 2,464 -
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Total liabilities 83,272 - 79,717 - 79,413 -
Stockholders' equity 8,562 - 7,799 - 7,605 -
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Total liabilities and stockholders'
equity $ 91,834 - $ 87,516 - $ 87,018 -
- -----------------------------------------------------------------------------------------------------------------------
Net interest margin 4.75% 4.95% 4.99%
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