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, 1998
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.
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 January 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.
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Robert C. Lamb, Jr.
Controller
Chief Accounting Officer
Dated: January 15, 1998
EXHIBIT 99
Contacts: Media: James Mahoney Investor: Thomas Rice
(617) 346-5472 (617) 346-0148
T. Kevin Beatty
(617) 346-4963
FLEET FINANCIAL GROUP REPORTS
1997 NET INCOME OF $1.3 BILLION
EARNINGS PER SHARE UP 19% TO $4.74
BOSTON, MASSACHUSETTS, JANUARY 15, 1998: Fleet Financial Group, Inc. (FLT-NYSE)
today reported net income of $1.303 billion for 1997, an increase of $164
million compared to 1996 net income of $1.139 billion. Earnings per share
increased 19% to $4.74 from $3.98 in 1996. Return on assets and return on equity
for the year were 1.59% and 19.53%, respectively, compared to 1.37% and 17.43%
in 1996.
In the fourth quarter of 1997, Fleet's net income was $335 million, or
$1.23 per share, compared to $302 million, or $1.05 per share in 1996,
representing an 11% increase in net income and a 17% increase in earnings per
share. Return on assets and return on equity for the quarter were 1.62% and
19.23%, respectively, compared with 1.40% and 17.67% for the fourth quarter of
1996.
HIGHLIGHTS
"1997 was an outstanding year for Fleet and our employees. Earnings grew to
more than $1.3 billion while the company also made great progress towards its
strategic objectives," said Terrence Murray, Fleet's chairman and chief
executive officer. "We completed the integrations of the Shawmut and NatWest
acquisitions which solidified Fleet's position as the preeminent financial
services organization serving the northeast. We refined our business profile by
exiting businesses which were not meeting our criteria for risk or profitability
and were not critical to our vision for the company. At the same time, we
invested in businesses more central to our growth strategy which broadened our
product array and enhanced our distribution capabilities. The acquisitions of
Columbia Management Company, the Quick & Reilly Group, and the credit card
operations of Advanta Corporation will double Fleet's customer base to over 13
million customers, improve our revenue mix to nearly 50% fee income, further
diversify the geographic sources of Fleet's revenue streams, and boost earnings
momentum as we head into 1998."
Eugene M. McQuade, vice chairman and chief financial officer, provided
additional comments on the company's strong 1997 results. "Fleet saw healthy
loan growth throughout the year. This growth, against a backdrop of meaningful
declines in operating expenses, dramatically improved the operating leverage and
profitability of the company."
Mr. McQuade continued, "With a return on equity nearing 20% and a return on
assets of 1.6%, Fleet's performance measures rank among the leaders of the
industry and continue Fleet's record of building value for our shareholders. In
1997, we more than delivered on the integration efficiencies of our
acquisitions, expanded both our product line and customer base, and continued to
invest in technological advances for the future."
FINANCIAL HIGHLIGHTS
Net interest income totaled $3.7 billion for 1997, an increase of $228
million from 1996. Net interest margin improved 40 basis points to 5.21% in
1997, as the Corporation's balance sheet restructuring program lowered funding
costs and markedly enhanced the mix of earning assets. Net interest income for
the fourth quarter of 1997 totaled $923 million compared to $910 million in the
fourth quarter of 1996, reflecting the continued positive impact of the actions
noted above. Fourth quarter net interest margin was 5.19%, up 19 basis points
from last year's 5.00%.
The provision for credit losses was $322 million in 1997, an increase of
$109 million from 1996. Net charge-offs in 1997 were virtually flat at $376
million, increasing only $6 million. The provision for credit losses was $90
million in the fourth quarter of 1997 and net charge-offs of $90 million were
down $34 million from the fourth quarter of 1996. The strong improvement in net
charge-offs in the fourth quarter of 1997 was driven by continued improvement in
the Corporation's commercial loan portfolio. Nonperforming assets were reduced
by over $300 million (42%) during the year to $416 million. Continuing this
trend in the fourth quarter, nonperforming assets were reduced by $63 million
from September 30, 1997. The reserve for loan losses of $1.4 billion remained
unchanged from September 30, 1997, maintaining the Corporation's loss coverages
of 2.3% of total loans and 365% of nonperforming loans.
Noninterest income was $2.1 billion for 1997, compared to $2.0 billion in
1996. Service charges, fees and commissions increased 18% due to increases in
cash management and electronic banking volume. Investment services revenue also
increased 12%, as the corporation benefited from strong financial markets in
1997, as well as increasing levels of assets under management. Additionally,
corporate finance fees, a line of business started in the latter part of 1996,
grew over $40 million in 1997. Mortgage banking revenues decreased 12% in 1997
primarily due to the second quarter sale of Option One, one of the Corporation's
mortgage banking subsidiaries.
Noninterest income was $517 million for the quarter. This represents an
increase in noninterest income from continuing operations of $17 million after
excluding the impact of divested businesses. Growth was experienced in nearly
all core noninterest revenue categories including service charges, fees and
commissions, investment services revenue and corporate finance fees.
Noninterest expense totaled $3.2 billion in 1997, compared to $3.3 billion
during 1996. Noninterest expense totaled $796 million in the fourth quarter of
1997. Noninterest expense from continuing operations declined by $36 million
from $832 million in the fourth quarter of 1996 after excluding $25 million for
noninterest expense from divested businesses. Cost reductions included savings
from the successful completion of the integration of the Shawmut and NatWest
acquisitions. Aggregate cost savings from these two acquisitions totaled $750
million. This total exceeded the original cost savings projections by $150
million, or 25%.
Total assets at December 31, 1997, were $85.5 billion. However, the
composition of earning assets and funding sources has become significantly more
productive due to balance sheet restructuring actions over the past two years as
loans increased almost $4.5 billion, excluding the impact of divested
businesses, during the past year. Stockholders' equity amounted to $8.0 billion
at December 31, 1997, an increase of approximately $600 million from December
31, 1996.
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FLEET FINANCIAL GROUP
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED TWELVE MONTHS ENDED
December 31, September 30, December 31, December 31, December 31,
1997 1997 1996 1997 1996
For the Period ($ in millions)
<S> <C> <C> <C> <C> <C>
$ 335 $ 329 $ 302 Net Income $ 1,303 $ 1,139
1,440 1,440 1,439 Total Revenue 5,739 5,452
796 791 857 Total Expense 3,226 3,272
90 85 65 Provision for credit losses 322 213
Per Common Share
$ 1.28 $ 1.25 $ 1.08 Basic earnings per share $ 4.89 $ 4.06
1.23 1.21 1.05 Diluted earnings per share 4.74 3.98
75.13 65.56 49.88 Market value (period-end) 75.13 49.88
0.49 0.45 0.45 Cash dividends declared 1.84 1.74
28.10 25.42 24.66 Book value (period-end) 28.10 24.66
At Quarter End ($ in billions)
$ 85.5 $ 83.6 $ 85.5 Assets $ 85.5 $ 85.5
61.2 59.3 58.8 Loans and leases 61.2 58.8
63.7 62.9 67.1 Deposits 63.7 67.1
8.0 7.2 7.4 Total stockholders' equity 8.0 7.4
Operating Ratios
1.62% 1.60% 1.40% Return on average assets 1.59% 1.37%
19.23 19.89 17.67 Return on common equity 19.53 17.43
19.47 20.07 17.77 Return on realized common equity (a) 19.66 17.42
5.19 5.23 5.00 Net interest margin 5.21 4.81
55.3 54.9 59.5 Efficiency ratio 56.2(b) 60.0
9.4 8.6 8.7 Total equity/assets (period-end) 9.4 8.7
7.3 7.1 7.7 Tier 1 risk-based capital ratio (estimated) 7.3 7.7
10.9 10.8 11.4 Total risk-based capital ratio (estimated) 10.9 11.4
Asset Quality ($ in millions)
$ 416 $ 479 $ 723 Nonperforming assets $ 416 $ 723
1,432 1,432 1,488 Reserve for credit losses 1,432 1,488
Nonperforming assets as a % of loans,
0.68% 0.81% 1.23% leases, and OREO 0.68% 1.23%
0.49 0.57 0.85 Nonperforming assets as a % of total assets 0.49 0.85
0.64 0.77 1.18 Nonperforming loans to period-end loans 0.64 1.18
2.34 2.42 2.53 Reserve for credit losses to period-end loans 2.34 2.53
0.60 0.64 0.83 Net charge-offs/average loans 0.65 0.66
(a) Excludes average unrealized gains/losses on securities available for sale
(b) Excludes gains on sales of business units, net of charges
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FLEET FINANCIAL GROUP
CONSOLIDATED BALANCE SHEETS
($ in millions)
December 31, September 30, December 31,
1997 1997 1996
ASSETS:
Cash and cash equivalents $ 5,481 $ 6,563 $ 9,015
Securities 9,362 8,770 8,680
Loans and lease financing 61,179 59,264 58,844
Reserve for credit losses (1,432) (1,432) (1,488)
Mortgages held for resale 1,526 1,396 1,560
Other assets 9,419 9,014 8,907
Total assets $ 85,535 $ 83,575 $ 85,518
LIABILITIES:
Deposits $ 63,735 $ 62,907 $ 67,071
Short-term borrowings 6,903 6,524 3,627
Long-term debt 4,500 4,459 5,114
Other liabilities 2,363 2,498 2,291
Total liabilities 77,501 76,388 78,103
STOCKHOLDERS' EQUITY:
Preferred stock 691 835 953
Common stock 7,343 6,352 6,462
Total stockholders' equity 8,034 7,187 7,415
Total liabilities and
stockholders' equity $ 85,535 $ 83,575 $ 85,518
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FLEET FINANCIAL GROUP
CONSOLIDATED INCOME STATEMENTS
($ in millions)
THREE MONTHS ENDED TWELVE MONTHS ENDED
December 31, September 30, December 31, December 31, December 31,
1997 1997 1996 1997 1996
<C> <C> <C> <S> <C> <C>
$ 923 $ 926 $ 910 Net interest income (FTE) $ 3,667 $3,439
90 85 65 Provision for credit losses 322 213
833 841 845 Net interest income after provision 3,345 3,226
Noninterest income:
157 159 146 Service charges, fees, and commissions 633 537
108 104 98 Investment services revenue 418 372
67 66 109 Mortgage banking, net of amortization 327 373
24 24 31 Student loan servicing fees 101 98
161 161 145 Other 593 633
517 514 529 Total noninterest income 2,072 2,013
Noninterest expense:
376 384 423 Employee compensation and benefits 1,591 1,607
70 70 74 Occupancy 282 284
67 70 71 Equipment 274 266
43 41 40 Intangible asset amortization 163 135
240 226 249 Other 916 980
796 791 857 Total noninterest expense 3,226 3,272
554 564 517 Earnings before income taxes and net gains 2,191 1,967
-- -- -- Gains on sales of business units, net of charges 20 --
219 235 215 Income taxes and tax-equivalent adjustment 908 828
$ 335 $ 329 $ 302 Net income $ 1,303 $1,139
$ 1.28 $ 1.25 $ 1.08 Basic earnings per share $ 4.89 $ 4.06
1.23 1.21 1.05 Diluted earnings per share 4.74 3.98
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FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ in millions)
THREE MONTHS ENDED
December 31, 1997 September 30, 1997 December 31, 1996
Average Average Average
Balance Rate Balance Rate Balance Rate
ASSETS:
<S> <C> <C> <C> <C> <C>
Securities $ 9,095 6.74% $ 8,690 6.78% $ 10,261 6.71%
Loans and leases 59,889 8.71 58,087 8.72 59,256 8.58
Mortgages held for resale 1,305 7.56 1,222 7.47 1,569 8.20
Other earning assets 455 3.31 2,434 6.58 1,462 4.87
Total interest-earning assets 70,744 8.40% 70,433 8.38% 72,548 8.23%
Reserve for credit losses (1,430) - (1,441) - (1,546) -
Other assets 12,690 - 12,609 - 14,827 -
Total assets $ 82,004 - $ 81,601 - $ 85,829 -
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Savings $ 27,206 2.31% $ 27,325 2.23% $ 28,225 2.30%
Time 19,746 5.27 19,695 5.17 21,622 5.36
Total interest-bearing deposits 46,952 3.55 47,020 3.46 49,847 3.63
Short-term borrowings 5,420 5.12 5,315 5.03 3,903 4.47
Long-term debt 4,341 7.43 4,487 7.42 4,940 7.27
Total interest-bearing liabilities $ 56,713 4.00% $ 56,822 3.91% $ 58,690 3.99%
Net interest spread - 4.40% - 4.47% 4.24%
Demand deposits and other noninterest-
bearing time deposits $ 15,700 - $ 15,475 - $16,808 -
Other liabilities 2,227 - 2,219 - 2,961 -
Total liabilities 74,640 - 74,516 - 78,459 -
Stockholders' equity 7,364 - 7,085 - 7,370 -
Total liabilities and stockholders' equity $ 82,004 - $ 81,601 - $ 85,829 -
Net interest margin 5.19% 5.23% 5.00%
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FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ in millions)
TWELVE MONTHS ENDED
December 31, 1997 December 31, 1996
Average Average
Balance Rate Balance Rate
ASSETS:
<S> <C> <C> <C> <C>
Securities $ 8,674 6.73% $ 11,425 6.45%
Loans and leases 58,920 8.68 56,074 8.61
Mortgages held for resale 1,413 7.65 1,878 7.87
Other earning assets 1,411 5.68 2,120 7.75
Total interest-earning assets 70,418 8.36% 71,497 8.22%
Reserve for credit losses (1,454) - (1,493) -
Other assets 13,106 - 13,120 -
Total assets $ 82,070 - $ 83,124 -
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Savings $ 27,478 2.25% $ 26,363 2.33%
Time 20,036 5.16 20,971 5.44
Total interest-bearing deposits 47,514 3.48 47,334 3.70
Short-term borrowings 4,682 4.88 5,844 5.05
Long-term debt 4,608 7.34 5,486 7.10
Total interest-bearing liabilities $ 56,804 3.91% $ 58,664 4.16%
Net interest spread - 4.45% - 4.06%
Demand deposits and other noninterest-
bearing time deposits $ 15,882 - $ 15,042 -
Other liabilities 2,206 - 2,397 -
Total liabilities 74,892 - 76,103 -
Stockholders' equity 7,178 - 7,021 -
Total liabilities and stockholders' equity $ 82,070 - $ 83,124 -
Net interest margin 5.21% 4.81%
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