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) July 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.
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Pursuant to Form 8-K, General Instructions F, Registrant
hereby incorporates by reference the press release attached
hereto as Exhibit 99(a).
Item 7. Financial Statements and Other Exhibits.
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Exhibit No. Description
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Exhibit 99(a) Earnings Press Release dated July 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.
--------------------------------
Robert C. Lamb, Jr.
Controller
Chief Accounting Officer
Date: July 14, 1999
Contacts: Media: James Mahoney Investor: Thomas R. Rice
(617) 346-5472 (617) 346-0148
FLEET FINANCIAL GROUP
EARNINGS RISE 15% TO $450 MILLION
Boston, Massachusetts, July 14, 1999: Fleet Financial Group, Inc.
(FLT-NYSE) today reported record net income of $450 million, or $.74 per diluted
share, for the second quarter of 1999, a 15% increase compared with net income
of $393 million, or $.65 per diluted share, earned in the second quarter of
1998. The corporation earned $888 million, or $1.45 per diluted share, for the
six month period ending June 30, 1999, up 24% compared to $716 million, or $1.18
per diluted share, for the same period of 1998.
"Fleet demonstrated across the board strength," commented Terrence
Murray, Fleet's chairman and chief executive officer. "In addition to record net
income, Fleet also reached a major strategic goal recording a 50/50 split
between fee and spread revenue. This achievement provides tangible evidence of
the success of Fleet's business diversification strategy. Both our core
franchise and recent acquisitions continue to perform well, giving us strong
momentum as we approach our merger with BankBoston."
"Capital market related businesses had another outstanding quarter as
revenues increased 72%" said Robert J. Higgins, Fleet's president and chief
operating officer. "Quick & Reilly saw profits double from last year to almost
$50 million, while total fee revenue for the corporation rose by 28%. This
performance underlines the strength of our recently acquired businesses."
Commenting on Fleet's continuing improvement in profitability, Eugene
M. McQuade, vice chairman and Fleet's chief financial officer, said "Fleet's
profitability ranks among the highest performing banks in the country. Return on
assets reached 1.65% while return on equity hit 19.4%. This level of performance
is particularly satisfying in that it was achieved within the context of
continuing investments in our business lines and product and geographic
diversification. With proposed changes to accounting rules, cash basis
measurements take on increasing importance. At Fleet, our second quarter 1999
performance ratios on a cash basis were exceptionally strong: EPS of $.81,
return on assets of 1.86%, and return on common equity of 29.7%."
Financial Highlights
- --------------------
Net interest income totaled $1.03 billion during the second quarter of
1999, up $50 million from the second quarter of 1998. The increase was
principally attributable to the inclusion of Sanwa Business Credit for a full
quarter and strong growth in the corporation's commercial loan portfolio. The
corporation's net interest margin was 4.42%. Net interest income and net
interest margin were $2.08 billion and 4.50%, respectively, for the six month
period ending June 30, 1999 and $1.92 billion and 4.67%, respectively, for the
same period of 1998.
Noninterest income in the second quarter totaled $1.04 billion, up 28%,
or $227 million from the same period in 1998, due primarily to strong gains in
virtually all revenue categories. Fee revenue now represents 50% of total
revenue. Investment services revenue increased 20% to $264 million driven by a
strong equity market, which benefited the corporation's brokerage and clearing
units of Quick & Reilly. Processing-related revenues increased $33 million, or
26%, to $159 million due primarily to increased mortgage revenue bolstered by
mortgage production of nearly $10 billion. Capital markets revenue increased 72%
to $184 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 $66 million over the
prior year's second quarter which was attributable to the acquisition of various
credit card portfolios during 1998 and a decline in charge-offs within the
securitized credit card portfolio. For the six month period ending June 30,
1999, noninterest income jumped 33% to $2.0 billion when compared to $1.5
billion for the same period of 1998 as the corporation experienced robust growth
in all major business lines as well as the benefit of a number of acquisitions.
Noninterest expense in the second quarter of 1999 totaled $1.18
billion, up $161 million from the second quarter of 1998. The increase was due
primarily to the impact of various acquisitions, including Sanwa and the Merrill
Lynch Specialist business, in addition to incentive and volume-related increases
in compensation at many of Fleet's businesses that delivered strong revenue
growth. Noninterest expense increased $355 million to $2.3 billion for the first
six months of 1999 when compared to $1.94 billion for the same period of 1998 as
a result of various acquisitions made throughout 1998 and 1999 as well as an
increase in process-related expenses. Despite the increases in expenses, the
efficiency ratio declined from 56.7% in 1998 to 56.4% for the six months ended
June 30, 1999.
Fleet is Year 2000 ready. All of Fleet's internal systems have been
successfully remediated, tested and placed back into production. Year 2000
expenses for the second quarter were $8 million and $109 million since the
inception of the project. Focus areas for the remainder of 1999 include: vendor
management, contingency planning, borrower readiness and communications with
customers.
Nonperforming assets were $318 million at the end of the second
quarter, a decrease of $19 million compared to the same quarter of 1998. Net
charge-offs and the provision for credit losses were both $146 million in the
second quarter, higher than the second quarter of 1998 due to the inclusion of
the acquired credit card portfolios as well as Sanwa. The reserve for credit
losses remained stable at $1.723 billion and represents 2.29% of total loans and
559% of nonperforming loans.
Total assets at June 30, 1999 were $107.0 billion, up $2.6 billion from
December 31, 1998. Stockholders' equity amounted to $9.7 billion at June 30,
1999, an increase of $330 million from year end.
<PAGE>
FLEET FINANCIAL GROUP
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
June 30, March 31, June 30, June 30, June 30,
1999 1999 1998 1999 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
For the Period ($ in millions)
$ 450 $ 438 $ 393 Net Income $ 888 $ 716
2,067 2,001 1,790 Total Revenue 4,068 3,423
1,178 1,125 1,017 Total Expense 2,303 2,014
146 149 118 Provision for Credit Losses 295 210
Per Common Share (a)
$ .74 $ .72 $ .65 Diluted earnings per share $ 1.45 $ 1.18
.76 .74 .67 Basic earnings per share 1.51 1.22
.27 .27 .245 Cash dividends declared .54 .49
15.90 15.69 14.39 Book value (period-end) 15.90 14.39
At Period-End ($ in billions)
$ 107.0 $ 106.2 $ 100.7 Assets $ 107.0 $ 100.7
75.3 73.7 66.8 Loans 75.3 66.8
66.3 67.6 67.0 Deposits 66.3 67.0
9.7 9.6 8.9 Total stockholders' equity 9.7 8.9
Operating Ratios
1.65% 1.63% 1.59% Return on average assets 1.64% 1.51%
19.38 19.28 18.97 Return on common equity 19.33 17.51
4.42 4.59 4.60 Net interest margin 4.50 4.67
57.0 55.9(b) 56.8 Efficiency ratio 56.4(b) 56.7(b)
9.1 9.1 8.8 Total equity/assets (period-end) 9.1 8.8
6.9 6.6 6.8 Tier 1 risk-based capital ratio 6.9 6.8
11.1 10.9 10.8 Total risk-based capital ratio 11.1 10.8
Asset Quality ($ in millions)
$ 318 $ 280 $ 337 Nonperforming assets $ 318 $ 337
1,723 1,724 1,551 Reserve for credit losses 1,723 1,551
.42% .38% .50% Nonperforming assets as a % of loans .42% .50%
.30 .26 .33 Nonperforming assets as a % of total assets .30 .33
2.29 2.34 2.32 Reserve for credit losses to period-end loans 2.29 2.32
559 646 491 Reserve for credit losses to nonperforming loans 559 491
.79 .83 .71 Net charge-offs/average loans .81 .66
</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 SIX MONTHS ENDED
------------------------------------- ------------------------
June 30, March 31, June 30, June 30, June 30,
1999 1999 1998 1999 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net interest income (FTE) $ 1,031 $ 1,042 $ 981 $ 2,073 $ 1,919
Noninterest income:
Investment services revenue 264 248 220 511 421
Banking fees and commissions 194 193 182 387 358
Capital markets revenue 184 149 107 333 245
Credit card revenue 164 141 98 305 154
Processing-related revenue 159 153 126 312 186
Other 71 75 76 147 140
- -----------------------------------------------------------------------------------------------------------------------------
Total noninterest income 1,036 959 809 1,995 1,504
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Total Revenue 2,067 2,001 1,790 4,068 3,423
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Provision for credit losses 146 149 118 295 210
Noninterest expense:
Employee compensation and benefits 579 542 482 1,121 926
Equipment 81 86 74 166 154
Occupancy 75 76 75 150 149
Intangible asset amortization 71 71 59 142 110
Other 372 343 327 717 602
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Total noninterest expense 1,178 1,118 1,017 2,296 1,941
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Earnings before income taxes and merger-related charges 743 734 655 1,477 1,272
Income taxes and tax-equivalent adjustment 293 292 262 585 512
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Operating earnings before merger-related charges 450 442 393 892 760
Merger-related charges, net of tax - 4 - 4 44
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Net income $ 450 $ 438 $ 393 $ 888 $ 716
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Diluted earnings per share $ .74 $ .72 $ .65 $ 1.45 $ 1.18
Basic earnings per share .76 .74 .67 1.51 1.22
Diluted earnings per share, excluding merger charges .74 .72 .65 1.45 1.25
Basic earnings per share, excluding merger charges .76 .74 .67 1.51 1.29
</TABLE>
<PAGE>
FLEET FINANCIAL GROUP
CONSOLIDATED BALANCE SHEETS
($ in millions)
<TABLE>
<CAPTION>
June 30, March 31, June 30,
1999 1999 1998
---- ---- ----
<S> <C> <C> <C>
ASSETS:
Cash and equivalents $ 5,001 $ 4,862 $ 6,067
Securities 10,461 10,968 11,293
Loans 75,287 73,683 66,754
Reserve for credit losses (1,723) (1,724) (1,551)
Due from brokers/dealers 2,444 2,726 3,885
Mortgages held for resale 1,339 2,155 2,875
Other assets 14,139 13,496 11,390
- ----------------------------------------------------------------------------------------
Total assets $ 106,948 $ 106,166 $ 100,713
========================================================================================
LIABILITIES:
Deposits $ 66,344 $ 67,633 $ 66,992
Short-term borrowings 6,886 5,871 11,147
Due to brokers/dealers 3,775 3,823 4,983
Long-term debt 16,436 15,586 5,654
Other liabilities 3,767 3,641 3,076
- ----------------------------------------------------------------------------------------
Total liabilities 97,208 96,554 91,852
========================================================================================
STOCKHOLDERS' EQUITY:
Preferred stock 691 691 691
Common stock 9,049 8,921 8,170
- ----------------------------------------------------------------------------------------
Total stockholders' equity 9,740 9,612 8,861
- ----------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 106,948 $ 106,166 $ 100,713
========================================================================================
</TABLE>
<PAGE>
FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ in millions)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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June 30, 1999 March 31, 1999 June 30, 1998
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Average Average Average
Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Securities $ 10,816 6.48 % $ 10,565 6.53 % $ 11,099 6.58 %
Loans 74,528 8.11 72,649 8.32 66,329 8.68
Mortgages held for resale 2,673 6.99 3,819 6.86 2,513 7.26
Due from brokers/dealers 3,567 4.16 3,404 4.41 4,482 4.55
Other earning assets 1,847 5.40 1,377 5.21 1,018 3.82
- --------------------------------------------------------------------------------------------------------------------
Total interest-earning assets 93,431 7.68 % 91,814 7.86 % 85,441 8.09 %
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Reserve for credit losses (1,703) - (1,689) - (1,527) -
Other assets 16,906 - 16,788 - 15,233 -
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Total assets $ 108,634 - $ 106,913 - $ 99,147 -
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Savings $ 29,608 2.09 % $ 29,345 2.10 % $ 28,557 2.40 %
Time 21,045 4.75 22,151 4.98 22,765 5.33
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Total interest-bearing deposits 50,653 3.20 51,496 3.34 51,322 3.70
- --------------------------------------------------------------------------------------------------------------------
Short-term borrowings 7,335 3.94 8,071 4.03 9,005 4.77
Due to brokers/dealers 4,426 4.32 3,865 4.12 5,167 4.62
Long-term debt 15,931 5.93 13,198 6.08 5,572 7.48
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Total interest-bearing liabilities $ 78,345 3.89 % $ 76,630 3.92 % $ 71,066 4.20 %
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Net interest spread - 3.79 % - 3.94 % - 3.89 %
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Demand deposits and other noninterest-
bearing time deposits $ 16,873 - $ 16,874 - $ 16,283 -
Other liabilities 3,722 - 3,916 - 3,064 -
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Total liabilities 98,940 - 97,420 - 90,413 -
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Stockholders' equity 9,694 - 9,493 - 8,734 -
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' $ 108,634 - $ 106,913 - $ 99,147 -
- --------------------------------------------------------------------------------------------------------------------
Net interest margin 4.42 % 4.59 % 4.60 %
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</TABLE>
<PAGE>
FLEET FINANCIAL GROUP
CONSOLIDATED AVERAGE BALANCE SHEETS
($ in millions)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------------------
June 30, 1999 June 30, 1998
------------- -------------
Average Average
Balance Rate Balance Rate
------- ---- ------- ----
<S> <C> <C> <C> <C>
ASSETS:
Securities $ 10,691 6.50% $ 10,578 6.57%
Loans 73,594 8.21 64,476 8.67
Mortgages held for resale 3,243 6.92 2,078 7.25
Due from brokers/dealers 3,486 4.28 4,118 4.81
Other earning assets 1,613 5.32 1,021 4.40
- -----------------------------------------------------------------------------------------------------------
Total interest-earning assets 92,627 7.77% 82,271 8.12%
- -----------------------------------------------------------------------------------------------------------
Reserve for credit losses (1,696) - (1,497) -
Other assets 16,847 - 14,737 -
- -----------------------------------------------------------------------------------------------------------
Total assets $ 107,778 - $ 95,511 -
- -----------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Savings $ 29,477 2.09% $ 27,996 2.39%
Time 21,595 4.87 21,971 5.32
- -----------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 51,072 3.27 49,967 3.68
- -----------------------------------------------------------------------------------------------------------
Short-term borrowings 7,701 3.99 7,966 4.83
Due to brokers/dealers 4,147 4.23 4,867 4.72
Long-term debt 14,572 5.99 5,214 7.40
- -----------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities $ 77,492 3.90% $ 68,014 4.17%
- -----------------------------------------------------------------------------------------------------------
Net interest spread - 3.87% - 3.95%
- -----------------------------------------------------------------------------------------------------------
Demand deposits and other noninterest-
bearing time deposits $ 16,873 - $ 16,065 -
Other liabilities 3,819 - 2,783 -
- -----------------------------------------------------------------------------------------------------------
Total liabilities 98,184 - 86,862 -
- -----------------------------------------------------------------------------------------------------------
Stockholders' equity 9,594 - 8,649 -
- -----------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity 107,778 - $ 95,511 -
- -----------------------------------------------------------------------------------------------------------
Net interest margin 4.50% 4.67%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
