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 20, 1999
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, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 346-4000
(Former name or former address, if changed since last report)
<PAGE>
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 Press Release Reporting Fourth Quarter and Fiscal 1998
Earnings dated January 20, 1999
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, Fleet has duly caused this report to be signed in its behalf by the
undersigned hereunto duly authorized.
FLEET FINANCIAL GROUP, INC.
By: /s/Robert C. Lamb, Jr.
-------------------------------------
Robert C. Lamb, Jr.
Controller
Chief Accounting Officer
Date: January 20, 1999
Exhibit 99
Contacts: Media: James Mahoney Investor: Thomas R. Rice
(617) 346-5472 (617) 346-0148
FLEET FINANCIAL GROUP
1998 OPERATING EARNINGS INCREASED
14% TO $1.6 BILLION
Boston, Massachusetts, January 20, 1999: Fleet Financial Group, Inc.
(FLT-NYSE) today reported operating earnings of $1.58 billion, or $2.60 per
diluted share, for 1998, a 14% increase compared with $1.38 billion, or $2.31
per diluted share, earned in 1997. Return on assets and return on common equity
for the year were 1.61% and 18.61%, respectively, compared to 1.59% and 19.45%
in 1997. All earnings per share amounts reflect a two-for-one common stock
split, which was effective October 7, 1998.
In the fourth quarter of 1998, Fleet's net income was $416 million, or $.69
per diluted share, compared to net income of $334 million, which included $22
million of merger-related charges, or $.57 per diluted share in the fourth
quarter of 1997, representing a 25% increase in net income. Return on assets and
return on equity for the quarter were 1.62% and 18.62%, respectively, compared
with 1.51% and 17.98% for the fourth quarter of 1997.
Including the impact of merger-related charges and net gains on sales of
business units, net income was $1.53 billion and $1.37 billion in 1998 and 1997,
respectively, while earnings per diluted share were $2.52 and $2.30 in 1998 and
1997, respectively.
Terrence Murray, chairman and chief executive officer of Fleet Financial
Group commented on the results saying, "1998 was an outstanding year for Fleet.
Despite turbulence in the financial markets, we again reported record earnings.
Fleet continues to achieve profitability levels which place us in a leadership
position in the industry. Strong results were achieved both from our franchise
businesses as well as our acquisitions, including Quick & Reilly and Advanta's
credit card business. Credit quality and earnings momentum remain excellent,
providing us a solid foundation to continue the growth we have seen in this
company."
"Looking to 1999," Mr. Murray added, "The recent acquisitions of Sanwa's
leasing business and the Merrill Lynch Specialist business will continue to
advance Fleet's strategy of business line and geographic diversification. With
our domestic business focus, we appear poised to continue to reap the benefits
of a strong national and regional economy."
Robert J. Higgins, Fleet's president and chief operating officer said,
"Fleet continues to benefit from strong asset generation, particularly in
Commercial Banking where loans were up 15% for the year. Complementing solid
growth within our footprint, Fleet's national businesses, including Credit Card
and Asset Management, contributed to significant growth in fee income. Fee
income grew 32% over last year, and comprised 47% of fourth quarter revenue."
Asset quality remains quite favorable with very limited exposure to
international markets. Nonperforming assets decreased $7 million in the quarter
to $282 million, or just .41% of total loans. This marks the Corporation's ninth
consecutive quarter of declining nonperforming assets and a 32% decrease in the
past year. The reserve for loan losses is $1.55 billion at December 31, 1998 and
represents 2.2% of all loans and almost 586% coverage of nonperforming loans.
Financial Highlights - Revenues increase $950 million over 1997.
Net interest income totaled $3.9 billion for 1998, up $166 million from
1997. The increase is principally attributable to a $10 billion increase in
average earning assets, due largely to an 11% increase in average loans, which
includes the acquisition of the credit card operations of Advanta in the first
quarter, and strong growth in our commercial portfolio. Net interest income and
the net interest margin for the fourth quarter of 1998 were $1.0 billion and
4.61%, respectively, compared to $944 million and 4.95% in the fourth quarter of
1997, again driven by strong growth in the commercial loan portfolio.
Noninterest income totaled $3.2 billion for 1998, an increase of $781
million, or 32%, from 1997 as our broad business mix produced strong gains in
virtually all revenue categories. Investment services revenue increased 22% to
$851 million, driven by the acquisition of Quick & Reilly as well as growth in
assets under management, including the acquisition of Columbia Management
Company in late 1997. Capital markets revenue increased 63% to $530 million
primarily driven by strong venture capital and brokerage market-making revenue,
reflecting the strength of the equity markets. Credit card revenue increased
$329 million over the prior year, which is principally attributable to the
aforementioned acquisition of the credit card operations of Advanta.
Noninterest income was $890 million during the fourth quarter, an increase
of $266 million, or 43%, over the fourth quarter of 1997. Significant growth was
noted in nearly all core revenue categories, particularly credit cards and
capital markets revenue. Capital markets revenue increased 83% as excellent
growth was noted in corporate finance fees, venture capital revenue,
market-making activities at Quick & Reilly, as well as foreign exchange/interest
rate products trading revenue. In addition, progress was achieved in
processing-related revenue which increased 41% over the fourth quarter of 1997
and included strong gains from mortgage banking as the low interest rate
environment contributed to record origination volumes. Investment services
revenue also increased 20% from the fourth quarter of 1997, reflecting strong
equity markets and higher volumes at Quick & Reilly.
Noninterest expense totaled $4.1 billion in 1998, an increase of $521
million over 1997, primarily the result of acquisitions. Employee compensation
and benefits increased due to higher commissions expense related to increased
volumes at Quick & Reilly and Fleet Mortgage, the acquisitions of Columbia and
the credit card operations of Advanta, as well as a number of new business
initiatives. With revenue growth more than keeping pace with expense growth, the
Company reported an efficiency ratio of 56.7% for 1998. Noninterest expense was
$1.1 billion during the quarter, a $186 million increase over the fourth quarter
of 1997, reflecting the impact of a number of the aforementioned reasons.
Total assets at December 31, 1998 were $104.4 billion, up $13 billion this
year, driven by $7 billion growth in our loan portfolio to $69.4 billion.
Stockholders' equity amounted to $9.4 billion at December 31, 1998.
<PAGE>
FLEET FINANCIAL GROUP
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
December 31, September 30, December 31, December 31, December 31,
1998 1998 1997 (a) 1998 (a) 1997 (a)
For the Period ($ in millions)
<S> <C> <C> <C> <C> <C>
Net income (operating basis) $ 416 $ 401 $ 356 $ 1,576 $ 1,377
Total Revenue 1,897 1,822 1,568 7,142 6,195
Total Expense 1,073 1,042 887 4,056 3,535
Provision for credit losses 140 120 90 470 322
Per Common Share (b)
Diluted earnings per share $ .69 $ .66 $ .61 $ 2.60 $ 2.31
Basic earnings per share .71 .68 .63 2.69 2.38
Market value (period-end) 44.69 36.72 37.56 44.69 37.56
Cash dividends declared .27 .245 .245 1.00 .92
Book value (period-end) 15.31 14.95 13.68 15.31 13.68
At Period-End ($ in billions)
Assets $ 104.4 $ 99.5 $ 91.0 $ 104.4 $ 91.0
Loans 69.4 68.2 62.6 69.4 62.6
Deposits 69.7 66.0 63.7 69.7 63.7
Total stockholders' equity 9.4 9.2 8.5 9.4 8.5
Operating Ratios
Return on average assets 1.62 % 1.60 % 1.61 % 1.61 % 1.59 %
Return on common equity 18.62 18.56 19.24 18.61 19.45
Net interest margin 4.61 4.58 4.95 4.63 5.01
Efficiency ratio (c) 56.6 56.7 56.5 56.7 57.0
Total equity/assets (period-end) 9.0 9.2 9.3 9.0 9.3
Tier 1 risk-based capital ratio 7.0 6.8 7.3 7.0 7.3
Total risk-based capital ratio 11.1 11.1 10.7 11.1 10.7
Asset Quality ($ in millions)
Nonperforming assets $ 282 $ 289 $ 416 $ 282 $ 416
Reserve for credit losses 1,552 1,552 1,432 1,552 1,432
Nonperforming assets as a % of loans .41 % .42 % .66 % .41 % .66 %
Nonperforming assets as a % of total assets .27 .29 .46 .27 .46
Reserve for credit losses to period-end loans 2.24 2.28 2.29 2.24 2.29
Reserve for credit losses to nonperforming
loans 586 566 365 586 365
Net charge-offs/average loans .81 .70 .58 .71 .63
</TABLE>
(a) Excludes merger-related charges and other nonrecurring items. Including
merger-related charges and other nonrecurring items, financial data and
ratios were as follows:
THREE MONTHS TWELVE MONTHS ENDED
ENDED
December 31, 1997 December 31, December 31,
1998 1997
Net Income $ 334 $ 1,532 $ 1,367
Total Revenue 1,568 7,142 6,370
Total Expense 912 4,129 3,715
Diluted earnings per share .57 2.52 2.30
Basic earnings per share .58 2.61 2.37
Return on average assets 1.51 % 1.56 % 1.58 %
Return on common equity 17.98 18.07 19.30
(b) All common share data for all periods presented reflects the
two-for-one common stock split which was effective October 7, 1998.
(c) The efficiency ratio excludes nonrecurring items related to mergers,
dispositions and special charges.
<PAGE>
FLEET FINANCIAL GROUP
CONSOLIDATED INCOME STATEMENTS
($ in millions)
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
December 31, September 30, December 31, December 31, December 31,
1998 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C>
Net interest income (FTE) $ 1,007 $ 979 $ 944 $ 3,905 $ 3,739
Provision for credit losses 140 120 90 470 322
--- --- -- --- ---
Net interest income after provision 867 859 854 3,435 3,417
--- --- --- ----- -----
Noninterest income:
Investment services revenue 220 210 183 851 696
Banking fees and commissions 192 197 176 748 708
Capital markets revenue 161 124 88 530 326
Processing-related revenue 142 129 101 457 473
Credit card revenue 120 117 17 391 62
Other 55 66 59 260 191
-- -- -- --- ---
Total noninterest income 890 843 624 3,237 2,456
Noninterest expense:
Employee compensation and benefits 512 489 422 1,927 1,752
Equipment 76 77 81 307 317
Occupancy 74 75 74 298 294
Intangible asset amortization 60 58 44 227 169
Other 351 343 266 1,297 1,003
--- --- --- ----- -----
Total noninterest expense 1,073 1,042 887 4,056 3,535
----- ----- --- ----- -----
Earnings before income taxes and special items 684 660 591 2,616 2,338
Income taxes and tax-equivalent adjustment 268 259 235 1,040 961
--- --- --- ----- ---
Operating earnings before special items 416 401 356 1,576 1,377
Merger-related charges, net of tax - - 22 44 22
Gains on sales of business units, net of charges
and tax - - - - 12
--- --- --- ----- ---
Net Income $ 416 $ 401 $ 334 $ 1,532 $ 1,367
===== ===== ===== ======= ========
Diluted earnings per share, operating earnings $ .69 $ .66 $ .61 $ 2.60 $ 2.31
Basic earnings per share, operating earnings .71 .68 .63 2.69 2.38
Diluted earnings per share .69 .66 .57 2.52 2.30
Basic earnings per share .71 .68 .58 2.61 2.37
</TABLE>
<PAGE>
FLEET FINANCIAL GROUP
CONSOLIDATED BALANCE SHEETS
($ in millions)
<TABLE>
<CAPTION>
December 31, September 30, December 31,
1998 1998 1997
ASSETS:
<S> <C> <C> <C>
Cash and equivalents $ 5,738 $ 4,759 $ 5,574
Securities 10,792 10,227 9,362
Loans 69,396 68,205 62,565
Reserve for credit losses (1,552) (1,552) (1,432)
Due from brokers/dealers 3,600 3,248 3,510
Mortgages held for resale 3,960 2,638 1,526
Other assets 12,448 11,954 9,942
------------ ------------ -----------
Total assets $ 104,382 $ 99,479 $ 91,047
============ =========== ===========
LIABILITIES:
Deposits $ 69,678 $ 65,955 $ 63,735
Short-term borrowings 9,312 9,435 7,505
Due to brokers/dealers 3,975 4,307 4,316
Long-term debt 8,820 7,368 4,500
Other liabilities 3,188 3,239 2,539
------------ ------------ -----------
Total liabilities 94,973 90,304 82,595
============ =========== ===========
STOCKHOLDERS' EQUITY:
Preferred stock 691 691 691
Common stock 8,718 8,484 7,761
------------ ------------ -----------
Total stockholders' equity 9,409 9,175 8,452
------------ ------------ -----------
Total liabilities and stockholders' $ 104,382 $ 99,479 $ 91,047
============ =========== ===========
equity
</TABLE>
<PAGE>
FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ in millions)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
December 31, 1998 September 30, 1998 December 31, 1997
Average Average Average
Balance Rate Balance Rate Balance Rate
ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Securities $ 10,212 6.58 % $ 10,010 6.62 % $ 9,095 6.74 %
Loans 68,753 8.42 67,908 8.58 61,274 8.70
Mortgages held for resale 3,256 6.81 3,064 7.08 1,305 7.56
Due from brokers/dealers 3,455 4.72 3,380 5.25 3,510 4.25
Other earning assets 1,488 4.51 1,076 4.59 685 4.24
----- ---- ----- ---- --- ----
Total interest-earning assets 87,164 7.93 % 85,438 8.11 % 75,869 8.20 %
------ ---- ------ ---- ------ ----
Reserve for credit losses (1,518) - (1,523) - (1,430) -
Other assets 15,945 - 15,424 - 13,077 -
------ ------ ------
Total assets $ 101,591 - $ 99,339 - $ 87,516 -
========= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Savings $ 29,289 2.25 % $ 28,861 2.42 % $ 27,206 2.31 %
Time 22,078 5.13 22,106 5.30 19,746 5.27
------ ---- ------ ---- ------ ----
Total interest-bearing deposits 51,367 3.49 50,967 3.67 46,952 3.55
------ ---- ------ ---- ------ ----
Short-term borrowings 8,603 4.34 9,051 5.04 6,023 4.98
Due to brokers/dealers 3,932 4.55 4,350 5.00 4,316 4.07
Long-term debt 8,006 6.83 6,575 7.19 4,341 7.43
----- ---- ----- ---- ----- ----
Total interest-bearing liabilities 71,908 4.02 % $ 70,943 4.25 % $ 61,632 4.00 %
------ ---- --------- ---- -------- ----
Net interest spread - 3.91 % - 3.86 % - 4.20 %
Demand deposits and other noninterest-
bearing time deposits $ 17,010 - $ 16,157 - $ 15,700 -
Other liabilities 3,398 - 3,253 - 2,385 -
----- ----- -----
Total liabilities 92,316 - 90,353 - 79,717 -
------ ------ ------
Stockholders' equity 9,275 - 8,986 - 7,799 -
----- ----- -----
Total liabilities and stockholders'
equity $ 101,591 - $ 99,339 - $ 87,516 -
========= ========= ========
Net interest margin 4.61 % 4.58 % 4.95 %
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ in millions)
TWELVE MONTHS ENDED
December 31, 1998 December 31, 1997
Average Average
Balance Rate Balance Rate
ASSETS:
<S> <C> <C> <C> <C>
Securities $ 10,343 6.59 % $ 8,674 6.73 %
Loans 66,419 8.58 60,076 8.68
Mortgages held for resale 2,623 7.05 1,413 7.65
Due from brokers/dealers 3,765 4.89 2,884 4.62
Other earning assets 1,153 4.48 1,597 5.74
----- ---- ----- ----
Total interest-earning assets 84,303 8.07 % 74,644 8.21 %
------ ---- ------ ----
Reserve for credit losses (1,509) - (1,454) -
Other assets 15,214 - 13,470 -
------ ------
Total assets $ 98,008 - $ 86,660 -
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Savings $ 28,540 2.36 % $ 27,478 2.25 %
Time 22,032 5.27 20,036 5.16
------ ---- ------ ----
Total interest-bearing deposits 50,572 3.63 47,514 3.48
------ ---- ------ ----
Short-term borrowings 8,400 4.76 5,266 4.69
Due to brokers/dealers 4,501 4.75 3,463 4.39
Long-term debt 6,261 7.15 4,608 7.34
----- ---- ----- ----
Total interest-bearing liabilities $ 69,734 4.15 % $ 60,851 3.93 %
======== ==== ========= ====
Net interest spread - 3.92 % - 4.28 %
Demand deposits and other noninterest-
bearing time deposits $ 16,326 - $ 15,882 -
Other liabilities 3,056 - 2,338 -
----- -----
Total liabilities 89,116 - 79,071 -
------ ------
Stockholders' equity 8,892 - 7,589 -
----- -----
Total liabilities and stockholders'
equity $ 98,008 - $ 86,660 -
======== =========
Net interest margin 4.63 % 5.01 %
</TABLE>
