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 14, 1999
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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, Massachusetts 02110
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 346-4000
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(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
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Exhibit 99(a) Earnings Press Release dated April 14, 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.
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Robert C. Lamb, Jr.
Controller
Chief Accounting Officer
Date: April 14,1999
Exhibit 99
Contacts: Media: James Mahoney Investor: Thomas R. Rice
(617) 346-5472 (617) 346-0148
FLEET FINANCIAL GROUP
EARNINGS RISE 36% TO $438 MILLION OR $.72 PER SHARE
Boston, Massachusetts, April 14, 1999: Fleet Financial Group, Inc.
(FLT-NYSE) today reported record net income of $438 million, or $.72 per diluted
share, for the first quarter of 1999, a 36% increase compared with net income of
$323 million, or $.53 per diluted share, earned in the first quarter of 1998.
Return on assets and return on common equity for the first quarter of 1999 were
1.63% and 19.28%, respectively. Included in the first quarter of 1998 was a $44
million merger charge ($.07 per share) pertaining to the acquisitions of Quick &
Reilly and the credit card operations of Advanta.
"It was a spectacular quarter," said Terrence Murray, Fleet's chairman and
chief executive officer. "The business momentum we felt in 1998 has accelerated
in the early part of 1999. Earnings were driven by 23% revenue growth over last
year. We saw strength across the entire franchise as the success of Fleet's
product and marketing strategies, as well as the success of our recent
acquisitions, were further enhanced by a favorable business environment. This
momentum provides a solid foundation for the recently announced merger with
BankBoston."
Robert J. Higgins, president and chief operating officer, said "The quality
of the quarter was evident in the strong level of earnings achieved throughout
our business lines, particularly credit cards, brokerage and investment
services, commercial banking and mortgage banking. Our results also benefited
from the acquisition of Sanwa Business Credit which closed on February 1, adding
both product and geographic diversity to our business profile."
Mr. Higgins provided further insights into the strength of the first
quarter's results saying "Earnings from credit cards rose sixfold to $30
million, while Quick & Reilly's earnings almost doubled to $47 million from the
first quarter of 1998. These outstanding results demonstrate the power of adding
new product lines to service Fleet's customer base of 15 million."
During the quarter, the corporation completed the acquisition of Sanwa
Business Credit (Sanwa), a leasing and asset-based lending company, which makes
Fleet Capital Corporation the third largest bank-owned leasing business in the
United States. The acquisition closed on February 1, 1999 and was accounted for
by the purchase method of accounting and as such, financial results for Sanwa
are included subsequent to the date of close ($6 million this quarter). In
addition, the corporation entered into an agreement on March 14, 1999 to merge
with BankBoston Corporation (BankBoston). The merger is expected to close in the
latter half of 1999, pending approval from regulatory authorities, and will make
the corporation the eighth largest financial institution in the country.
Financial Highlights
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Net interest income totaled $1.042 billion during the first quarter of
1999, up 11%, or $104 million from the first quarter of 1998. The increase is
principally attributable to the inclusion of Sanwa for two months and the
acquisition of $1.3 billion of credit card receivables from Household at the end
of the fourth quarter of 1998 as well as stronger fee revenue as a result of
higher credit card and commercial loan fees. The corporation's net interest
margin was 4.59%.
Noninterest income in the first quarter totaled $959 million, up 38%, or
$264 million from the same period in 1998, due primarily to strong gains in
virtually all revenue categories. Fee revenue now represents 48% of total
revenue. Investment services revenue increased 23% to $248 million driven by a
strong equity market, which benefited the corporation's brokerage and clearing
units of Quick & Reilly, and increased sales of mutual fund and annuity
products. Processing-related revenues increased $94 million, or 159%, to $153
million due primarily to increased mortgage revenue bolstered by record mortgage
production of $13 billion. Capital markets revenue, excluding $51 million of
securities gains taken in last year's first quarter, increased 71% to $149
million as a result of robust gains in market-making revenue from our equity
specialists business, as well as strong venture capital revenue and investment
banking fees. Credit card revenue increased $85 million over the prior year's
first quarter which is attributable to the acquisition of various credit card
portfolios during 1998, including the consumer credit card operations of Advanta
in February, 1998.
Noninterest expense in the first quarter of 1999 totaled $1.12 billion, up
$194 million from the first quarter of 1998. The increase was due primarily to
the impact of various acquisitions, including Advanta, Sanwa and the Merrill
Lynch Specialist business, in addition to incentive and volume-related increases
in compensation at many of our businesses that delivered strong revenue growth.
Nonperforming assets continue their decline and have decreased 25% in the
past year to $280 million at the end of the first quarter. Net charge-offs and
the provision for credit losses were both $149 million in the first quarter,
higher than the first quarter of 1998 due to the inclusion of the acquired
credit card portfolios as well as Sanwa. The reserve for credit losses increased
$172 million from year-end to $1.724 billion, as a result of the Sanwa
acquisition and now represents 2.34% of total loans and 646% of nonperforming
loans.
Fleet's focus on balance sheet and capital management were again obvious
this quarter as total assets at March 31, 1999 grew less than $2 billion since
December 31, 1998 to $106.2 billion, despite the acquisition of $6 billion of
assets from Sanwa. Loans grew by $4.3 billion to $73.7 billion and stockholders'
equity amounted to $9.6 billion at March 31, 1999, $1 billion greater than a
year ago.
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FLEET FINANCIAL GROUP
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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March 31, December 31, March 31,
1999 1998 1998
---- ---- ----
<S> <C> <C> <C> <C>
For the Period ($ in millions)
Net Income $ 438 $ 416 $ 323
Total Revenue 2,001 1,897 1,633
Total Expense 1,125 1,073 997
Provision for Credit Losses 149 140 92
Per Common Share (a)
Diluted earnings per share $ .72 $ .69 $ .53
Basic earnings per share .74 .71 .55
Cash dividends declared .27 .27 .245
Book value (period-end) 15.69 15.31 13.96
At Period-End ($ in billions)
Assets $ 106.2 $ 104.4 $ 97.7
Loans 73.7 69.4 65.0
Deposits 67.6 69.7 68.2
Total stockholders' equity 9.6 9.4 8.6
Operating Ratios
Return on average assets 1.63% 1.62% 1.43%
Return on common equity 19.28 18.62 16.00
Net interest margin 4.59 4.61 4.75
Efficiency ratio 55.9 (b) 56.6 56.6 (b)
Total equity/assets (period-end) 9.1 9.0 8.8
Tier 1 risk-based capital ratio 6.7 7.0 6.4
Total risk-based capital ratio 11.0 11.1 10.4
Asset Quality ($ in millions)
Nonperforming assets $ 280 $ 282 $ 373
Reserve for credit losses 1,724 1,552 1,553
Nonperforming assets as a % of loans .38% .41% .57%
Nonperforming assets as a % of total assets .26 .27 .38
Reserve for credit losses to period-end loans 2.34 2.24 2.39
Reserve for credit losses to nonperforming loans 646 586 441
Net charge-offs/average loans .83 .81 .60
</TABLE>
(a) All common share data for all periods presented reflects the two-for-one
common stock split which was effective October 7, 1998.
(b) The efficiency ratio excludes merger-related charges of $7 million and $73
million recorded in the first quarters of 1999 and 1998, respectively.
<PAGE>
FLEET FINANCIAL GROUP
CONSOLIDATED INCOME STATEMENTS
($ in millions)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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March 31, December 31, March 31,
1999 1998 1998
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<S> <C> <C> <C>
Net interest income (FTE) $ 1,042 $ 1,007 $ 938
Noninterest income:
Investment services revenue 248 220 201
Banking fees and commissions 193 192 176
Processing-related revenue 153 142 59
Capital markets revenue 149 161 138
Credit card revenue 141 120 56
Other 75 55 65
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Total noninterest income 959 890 695
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Total Revenue 2,001 1,897 1,633
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Provision for credit losses 149 140 92
Noninterest expense:
Employee compensation and benefits 542 512 445
Equipment 86 76 80
Occupancy 76 74 74
Intangible asset amortization 71 60 51
Other 343 351 274
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Total noninterest expense 1,118 1,073 924
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Earnings before income taxes and merger-related charges 734 684 617
Income taxes and tax-equivalent adjustment 292 268 250
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Operating earnings before merger-related charges 442 416 367
Merger-related charges, net of tax 4 - 44
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Net income $ 438 $ 416 $ 323
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Diluted earnings per share $ .72 $ .69 $ .53
Basic earnings per share .74 .71 .55
Diluted earnings per share, excluding merger charges .72 .69 .60
Basic earnings per share, excluding merger charges .74 .71 .63
</TABLE>
<PAGE>
FLEET FINANCIAL GROUP
CONSOLIDATED BALANCE SHEETS
($ in millions)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1999 1998 1998
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ASSETS:
<S> <C> <C> <C>
Cash and equivalents $ 4,862 $ 5,738 $ 5,493
Securities 10,968 10,792 11,279
Loans 73,683 69,396 64,986
Reserve for credit losses (1,724) (1,552) (1,553)
Due from brokers/dealers 2,726 3,600 3,567
Mortgages held for resale 2,155 3,960 2,416
Other assets 13,496 12,448 11,499
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Total assets $ 106,166 $104,382 $97,687
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LIABILITIES:
Deposits $ 67,633 $ 69,678 $ 68,165
Short-term borrowings 5,871 9,312 8,238
Due to brokers/dealers 3,823 3,975 4,433
Long-term debt 15,586 8,820 5,095
Other liabilities 3,641 3,188 3,136
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Total liabilities 96,554 94,973 89,067
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STOCKHOLDERS' EQUITY:
Preferred stock 691 691 691
Common stock 8,921 8,718 7,929
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Total stockholders' equity 9,612 9,409 8,620
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Total liabilities and stockholders' equity $ 106,166 $104,382 $97,687
================================================================================
</TABLE>
<PAGE>
FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ in millions)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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March 31, 1999 December 31, 1998 March 31, 1998
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Average Average Average
Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ----
ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Securities $ 10,565 6.53% $ 10,212 6.58% $ 10,051 6.56%
Loans 72,649 8.32 68,753 8.42 62,603 8.66
Mortgages held for resale 3,819 6.86 3,256 6.81 1,637 7.25
Due from brokers/dealers 3,404 4.41 3,455 4.72 3,749 5.13
Other earning assets 1,377 5.21 1,488 4.51 1,025 4.99
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Total interest-earning assets 91,814 7.86% 87,164 7.93% 79,065 8.15%
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Reserve for credit losses (1,689) --- (1,518) --- (1,466) ---
Other assets 16,788 --- 15,945 --- 14,235 ---
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Total assets $ 106,913 --- $ 101,591 --- $ 91,834 ---
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Savings $ 29,345 2.10% $ 29,289 2.25% $ 27,429 2.37%
Time 22,151 4.98 22,078 5.13 21,167 5.31
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Total interest-bearing deposits 51,496 3.34 51,367 3.49 48,596 3.65
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Short-term borrowings 9,009 3.61 8,603 4.34 6,914 4.90
Due to brokers/dealers 3,865 4.12 3,932 4.55 4,564 4.83
Long-term debt 13,198 6.08 8,006 6.83 4,853 7.31
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Total interest-bearing liabilities $ 77,568 3.87% $ 71,908 4.02% $ 64,927 4.14%
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Net interest spread --- 3.99% --- 3.91% --- 4.01%
==========================================================================================================================
Demand deposits and other noninterest-
bearing time deposits $ 16,874 --- $ 17,010 --- $ 15,844 ---
Other liabilities 2,978 --- 3,398 --- 2,501 ---
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Total liabilities 97,420 --- 92,316 --- 83,272 ---
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Stockholders' equity 9,493 --- 9,275 --- 8,562 ---
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Total liabilities and stockholders'
equity $106,913 --- $ 101,591 --- $ 91,834 ---
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Net interest margin 4.59% 4.61% 4.75%
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</TABLE>
