Contacts: Media: James Mahoney Investor: John Kahwaty
(617) 434-9552 (617) 434-3650
FLEETBOSTON REPORTS NET INCOME OF
$841 MILLION OR $.90 PER SHARE
OPERATING EPS $.84, UP 14% FROM PRIOR YEAR
Boston, Massachusetts, October 17, 2000: FleetBoston Financial (FBF-NYSE)
today reported third quarter operating earnings of $782 million, or $.84 per
share, up 14% on an earnings per share basis from $711 million, or $.74 per
share, in the third quarter of 1999. Return on assets and return on equity for
the quarter, on an operating basis, were 1.74% and 20.80%, respectively,
compared with 1.50% and 19.55%, a year ago. In addition, the corporation
realized divestiture gains, net of merger-related expenses, of $59 million
(after-tax) related to the third quarter divestitures of approximately $5
billion of deposits and $2 billion of loans, as well as expenses related to the
merger of BankBoston and Fleet. Including the impact of these items, net income
was $841 million, or $.90 per share, in the third quarter of 2000, up 22% on an
earnings per share basis from the third quarter of 1999. Return on assets and
return on equity for the quarter were 1.88% and 22.41%, respectively.
For the first nine months of 2000, operating earnings were $2.4 billion, or
$2.53 per share, up 18% on an earnings per share basis from $2.1 billion, or
$2.15 per share in the first nine months of 1999. Net income for the first nine
months of 2000, which included divestiture gains and merger-related expenses,
was $2.6 billion, or $2.84 per share, up 32% on an earnings per share basis from
$2.1 billion, or $2.15 per share in the first nine months of 1999.
Terry Murray, Chairman and Chief Executive Officer of FleetBoston
commented, "We celebrate the one year anniversary of the Fleet/BankBoston merger
with a terrific earnings report which highlights the strength and diversity of
our businesses. We have spent the past year hard at work putting the company
together and ensuring that we met the original promises made to our
shareholders. I am pleased to report successes across the board on these
initiatives and that our integration work is essentially complete. As our
company shifts to a more offensive-minded strategy, we are delighted to have
announced our pending acquisition of Summit Bancorp earlier this month. Summit
enhances the value of our franchise by giving us the number one position in the
attractive New Jersey market. In addition, this transaction will provide an
opportunity to distribute our asset management and capital markets products to a
broadened customer base."
Chad Gifford, President and Chief Operating Officer said, "Echoing Terry's
comments, we also celebrate our first anniversary by launching a major branding
campaign. We are very excited about the prospects of leveraging our strong
market positions and attracting new customers to our company. It is important to
note that even as we launch this initiative, our earnings this quarter and for
the past year have been quite strong. Despite the inevitable distraction that
comes with putting together two large companies, we saw revenues grow 13% over
the first nine months of 1999. Our overall franchise is very well positioned,
given the growth nature of our underlying businesses coupled with a strong
balance sheet."
Third Quarter Financial Highlights
----------------------------------
Noninterest income, excluding divestiture gains, was $2.0 billion in the
third quarter, an increase of $294 million, or 17%, over the third quarter of
1999. This growth was mainly due to higher levels of capital markets and
investment services revenue. Noninterest income as a percentage of total revenue
grew to 55% in the current quarter from 50% in the third quarter of last year.
Net interest income for the third quarter was $1.6 billion, down $113
million from the third quarter of last year due to lost revenue from
divestitures, as the Corporation has divested approximately $13 billion of low
cost deposits and $9 billion of loans during the past year. The net interest
margin improved 4 basis points from last year's quarter to 4.25% due, in part,
to the elimination of the regulatory requirement to maintain certain levels of
low yielding assets to support revenue from Robertson Stephens, partially offset
by the impact of divestitures.
Noninterest expense, excluding the impact of the merger and related
charges, was $2.0 billion during the quarter, down slightly from the third
quarter of 1999. Declines from merger-related cost savings and the impact of
divestitures more than offset an increase in incentive compensation expense
directly attributable to higher levels of revenue, particularly from capital
markets-related businesses. On an annualized basis, the total amount of cost
savings from merger integration activities is approximately $470 million and
approximately $800 million from the combination of cost savings and
divestitures. This represents 80% of the original target and the Corporation
remains on track to achieve our $1 billion target by the end of the year.
Nonperforming assets were $1,025 million, or .92% of total loans, at
September 30, 2000, including a $48 million credit that filed for bankruptcy
early in the fourth quarter. Nonperforming assets were $950 million, or .84% of
loans, at June 30, 2000. The provision for credit losses and net charge-offs
were $300 million and $296 million, respectively, in the current quarter and
$228 million for both in the third quarter of 1999. The reserve for credit
losses was $2.5 billion at September 30, 2000, representing 2.22% of total loans
and leases.
Total assets at September 30, 2000 were $179.1 billion, compared with
$181.3 billion at June 30, 2000 and $185.3 billion at September 30, 1999. The
decline in total assets is due, in part, to the divestiture of loans during the
first nine months of 2000. Stockholders' equity amounted to $15.6 billion at
September 30, 2000, with a common equity to assets ratio of 8.37%.
A detailed financial package containing supplemental information on the
third quarter financial results can be found by accessing the Corporation's web
site (http://www.fleet.com). Eugene M. McQuade, Vice-Chairman and Chief
Financial Officer, will hold a conference at 8:00 AM on Wednesday, October 18 to
discuss the quarterly results. This conference will be broadcast live on the
Corporation's web site (listen only mode).
*************
This release contains forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from
estimates. These risks and uncertainties include, among other things, (1)
changes in general political and economic conditions, either domestically or
internationally, or in the states in which the Corporation conducts its
business; (2) interest rate and currency fluctuations, equity and bond market
fluctuations and perceptions, the level of personal and corporate customers'
bankruptcies, and inflation; (3) changes in the competitive environment for
financial services organizations and the Corporation's ability to manage those
changes; (4) legislative or regulatory developments, including changes in laws
concerning taxes, banking, securities, insurance and other aspects of the
financial services industry; (5) technological changes including the impact of
the Internet on the Corporation's businesses; (6) the ability of the Corporation
to fully realize expected cost savings and revenue enhancements from mergers and
acquisitions or to realize those savings or revenue enhancements within the
expected timeframes; (7) the level of costs related to the integration of
acquired businesses; and (8) the impact of any divestitures required by
regulatory authorities in connection with mergers or acquisitions.
<PAGE>
FleetBoston Financial
Consolidated Income Statements
($ in millions)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 1,601 $ 1,714 Net interest income (FTE) $ 5,010 $ 5,111
Noninterest income:
749 471 Capital markets revenue 2,621 1,371
399 362 Investment services revenue 1,324 1,108
351 388 Banking fees and commissions 1,065 1,104
178 193 Credit card revenue 507 542
151 146 Processing-related revenue 457 457
158 132 Other 413 419
-------------------------------------------------------------------------------------------------------------------
1,986 1,692 Total noninterest income 6,387 5,001
-------------------------------------------------------------------------------------------------------------------
3,587 3,406 Total Revenue 11,397 10,112
-------------------------------------------------------------------------------------------------------------------
Noninterest expense:
1,062 1,053 Employee compensation and benefits 3,614 3,196
128 143 Occupancy 401 425
122 128 Equipment 374 384
87 88 Intangible asset amortization 263 259
608 604 Other 1,902 1,768
-------------------------------------------------------------------------------------------------------------------
2,007 2,016 Total noninterest expense 6,554 6,032
-------------------------------------------------------------------------------------------------------------------
1,580 1,390 Earnings before provision and income taxes 4,843 4,080
300 228 Provision for credit losses 911 688
498 451 Income taxes and tax-equivalent adjustment 1,570 1,320
-------------------------------------------------------------------------------------------------------------------
782 711 Net income - Operating 2,362 2,072
-------------------------------------------------------------------------------------------------------------------
84 - Divestiture gain, net of tax 420 -
25 - Integration charges, net of tax 137 -
-------------------------------------------------------------------------------------------------------------------
841 711 Net income - Reported 2,645 2,072
-------------------------------------------------------------------------------------------------------------------
$ .84 $ .74 Diluted earnings per share - operating $ 2.53 $ 2.15
.90 .74 Diluted earnings per share - reported 2.84 2.15
</TABLE>
<PAGE>
FleetBoston Financial
Consolidated Balance Sheets
($ in millions)
--------------------------------------------------------------------------------
September 30, September 30,
2000 1999
--------------------------------------------------------------------------------
ASSETS:
Cash and equivalents $ 10,359 $ 11,333
Securities 24,133 24,708
Trading assets 7,459 6,050
Loans and leases 111,097 119,772
Reserve for credit losses (2,463) (2,515)
Due from brokers/dealers 3,293 2,856
Mortgages held for resale 1,212 1,052
Other assets 24,003 22,039
--------------------------------------------------------------------------------
Total assets $ 179,093 $ 185,295
================================================================================
LIABILITIES:
Deposits $ 98,850 $ 113,184
Short-term borrowings 18,654 17,289
Due to brokers/dealers 4,627 3,884
Long-term debt 29,682 25,240
Trading liabilities 1,740 3,358
Other liabilities 9,990 6,883
--------------------------------------------------------------------------------
Total liabilities 163,543 169,838
================================================================================
STOCKHOLDERS' EQUITY:
Preferred stock 566 691
Common stock 14,984 14,766
--------------------------------------------------------------------------------
Total stockholders' equity 15,550 15,457
--------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 179,093 $ 185,295
================================================================================
<PAGE>
FleetBoston Financial
Financial Highlights
<TABLE>
<CAPTION>
======================================================================================================================
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
----------------------------------------------------------------------------------------------------------------------
For the Period ($ in millions)
<S> <C> <C> <C>
$ 782 $ 711 Net Income - operating (a) $ 2,362 $ 2,072
59 - Divestiture Gains/Integration charges, net of tax 283 -
841 711 Net Income - reported 2,645 2,072
3,587 3,406 Total Revenue (a) 11,397 10,112
2,007 2,016 Total Expense (a) 6,554 6,032
300 228 Provision for Credit Losses 911 688
Per Common Share
$ .84 $ .74 Earnings per share - operating (a) $ 2.53 $ 2.15
.90 .74 Earnings per share - reported 2.84 2.15
.90 .80 Cash earnings per share - operating (a) 2.72 2.33
.30 .27 Cash dividends declared .90 .81
16.56 16.01 Book value (period-end) 16.56 16.01
At Period-End ($ in billions)
$ 179.1 $ 185.3 Assets $ 179.1 $ 185.3
111.1 119.8 Loans 111.1 119.8
98.9 113.2 Deposits 98.9 113.2
15.6 15.5 Total stockholders' equity 15.6 15.5
Ratios
1.74% 1.50% Return on average assets (a) 1.68% 1.47%
20.80 19.55 Return on common equity (a) 21.59 19.42
4.25 4.21 Net interest margin 4.26 4.27
56.0 59.2 Efficiency ratio (a) 57.5 59.8
8.7 8.3 Total equity/assets (period-end) 8.7 8.3
6.3 5.8 Tangible common equity/assets 6.3 5.8
7.4 7.1 Tier 1 risk-based capital ratio 7.4 7.1
11.7 11.3 Total risk-based capital ratio 11.7 11.3
Asset Quality ($ in millions)
$ 1,025 $ 786 Nonperforming assets $ 1,025 $ 786
2,463 2,515 Reserve for credit losses 2,463 2,515
.92% .66% Nonperforming assets as a % of loans .92% .66%
2.22 2.10 Reserve for credit losses to period-end loans 2.22 2.10
1.05 .76 Net charge-offs/average loans .98 .74
===============================================================================================================
</TABLE>
(a) Excludes the impact of merger-related charges and other special items.
