Contacts: Media: James Mahoney Investor: John Kahwaty
(617) 434-9552 (617) 434-3650
FLEETBOSTON FOURTH QUARTER NET INCOME OF
$774 MILLION OR $.84 PER SHARE
FULL YEAR OPERATING EPS UP 16% FROM 1999
NONPERFORMING ASSETS REDUCED BY 10% FROM SEPTEMBER 30
Boston, Massachusetts, January 17, 2001: FleetBoston Financial
(FBF-NYSE) today reported fourth quarter earnings of $774 million, or $.84 per
share, up 11% from earnings of $726 million, or $.76 per share, in the fourth
quarter of 1999. Return on assets and return on equity for the quarter were
1.73% and 20.2%, respectively, compared with 1.50% and 19.6% a year ago.
For year 2000, operating earnings were $3.14 billion, or $3.37 per
share, up 16% from $2.80 billion, or $2.91 per share in 1999. Return on assets
and return on equity in 2000, on an operating basis, were 1.69% and 21.2%,
respectively, compared with 1.48% and 19.5%, in 1999. Net income for year 2000,
which included divestiture gains and merger-related expenses, was $3.42 billion,
or $3.68 per share. On this basis, full year earnings per share were up 75%
compared with the prior year.
As announced last week, the Corporation completed a sale of troubled
loans, with a carrying value of nearly $1 billion. The assets sold included
approximately $225 million of nonperforming loans, with the remainder
principally comprised of other classified, but accruing, loans. A charge of
approximately $75 million was taken against the Corporation's reserve for credit
losses as a result of this transaction. The effect of this transaction was to
improve the overall credit profile of the loan portfolio by reducing the level
of classified loans and lowering nonperforming assets at December 31 by 10% from
September 30. Loan loss reserves remain at approximately 2.2% of total loans at
December 31.
Terrence Murray, Chairman and Chief Executive Officer of FleetBoston
commented, "The first full year at FleetBoston was one of great success. Most
importantly, we comfortably exceeded the year 2000 earnings projections provided
to shareholders at the time we announced the Fleet/BankBoston merger back in
March 1999. This is a result of our diversified business mix and intense focus
to deliver committed results. There was no better example of this than the
fourth quarter where, despite an extremely tough capital markets environment
that had a noticeable impact on the revenue produced by these businesses, we
posted strong results. We also successfully completed the largest divestiture in
the history of the U.S. banking industry and, at the same time, fully converted
our combined customer base to common systems. Our integration schedule has been
on track each step of the way and we have hit our cost savings targets without
jeopardizing the revenue-generating capacity of our businesses. We now operate
on a single operating platform across our northeast footprint. As we look
towards 2001, we are energized by the fact that we are now truly one company."
Chad Gifford, President and Chief Operating Officer said, "We will hit
the ground running in 2001 with our new customer-focused organizational
structure in place and business initiatives such as e-commerce well along. We
are excited by the upcoming addition of Summit Bancorp to our company, which
will further enhance our business mix and give us the number one position in the
attractive New Jersey market. We will also continue to be very vigilant in
monitoring and taking action on our credit portfolio as illustrated by last
week's announcement of the sale of nearly $1 billion of troubled commercial
loans. With capital and reserves approaching $20 billion, our overall franchise
is very well positioned."
Fourth Quarter Financial Highlights
Total revenue in the current quarter was $3.37 billion. During the
fourth quarter, the US economy continued to show signs of weakening and this
created very difficult conditions for capital markets businesses. Compared to
the fourth quarter of last year, capital markets revenue declined $172 million,
mainly reflecting significantly lower levels of revenue from the Principal
Investing business and Robertson Stephens. Total noninterest income, excluding
the impact of divestitures, declined approximately $110 million from the fourth
quarter of 1999, as the aforementioned drop in capital markets revenue was
partially offset by growth in other areas, including cash management fees,
investment management revenue, and credit card income. Noninterest income as a
percentage of total revenue was 53% in the current quarter and 55% for the year.
Net interest income, excluding the impact of divestitures, improved $16 million
from the fourth quarter of 1999 reflecting an increase from Latin American
operations. Net interest margin improved to 4.17% in the current quarter from
4.12% in the prior year despite divestitures totaling approximately $13 billion
of low cost deposits and $9 billion of loans during 2000. For year 2000, total
revenue improved 10% compared with 1999, excluding the impact of these
divestitures.
Noninterest expense was $1.85 billion during the quarter, down $348
million from the fourth quarter of 1999. In addition to declines from
merger-related cost savings and the impact of divestitures, the drop in
noninterest expense was also affected by lower compensation expense due, in
part, to the previously discussed decline in capital markets revenue. On an
annualized basis, the total amount of cost savings from merger integration
activities is approximately $570 million and approximately $970 million from the
combination of cost savings and divestitures. This represents 97% of the
original target. The remaining reductions will be reflected in the first quarter
of 2001 results bringing the total of reductions to our target of $1 billion.
Nonperforming assets were $925 million, or .85% of total loans, at
December 31, 2000. This represents a 10% reduction from $1,025 million, or .92%
of total loans, at September 30, 2000. The decline in nonperforming assets was
due to the previously announced sale of troubled commercial loans that took
place during the fourth quarter. The year-end total included a $112 million loan
to a large financial services company that, while still paying interest, was
placed on nonaccrual status during the fourth quarter. The provision for credit
losses and net charge-offs were each $285 million in the current quarter and
$245 million in the fourth quarter of 1999. In addition, a charge of
approximately $75 million was taken against the reserve for credit losses as a
result of the aforementioned fourth quarter sale of troubled loans. The reserve
for credit losses was $2.4 billion at December 31, 2000, representing 2.17% of
total loans and leases.
Total assets at December 31, 2000 were $179.5 billion, compared with
$179.1 billion at September 30, 2000 and $190.7 billion at December 31, 1999.
The decline in total assets from 1999 is due, in part, to the divestiture of
loans during 2000. Stockholders' equity amounted to $16 billion at December 31,
2000, with a common equity to assets ratio of 8.70%.
A detailed financial package containing supplemental information on the
fourth quarter financial results can be found by accessing the Corporation's web
site (http://www.fleet.com). Eugene M. McQuade, Vice-Chairman and Chief
Financial Officer, will hold a conference at 8:00 AM on Thursday, January 18 to
discuss the quarterly results. This conference will be broadcast live on the
Corporation's web site.
*************
This release contains forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from
estimates. These risks and uncertainties include, among other things, (1)
changes in general political and economic conditions, either domestically or
internationally, or in the states in which the Corporation conducts its
business; (2) interest rate and currency fluctuations, equity and bond market
fluctuations and perceptions, the level of nonperforming assets and inflation;
(3) changes in the competitive environment for financial services organizations
and the Corporation's ability to manage those changes; (4) legislative or
regulatory developments, including changes in laws concerning taxes, banking,
securities, insurance and other aspects of the financial services industry; (5)
technological changes, including the impact of the Internet on the Corporation's
businesses; (6) the ability of the Corporation to fully realize expected cost
savings and revenue enhancements from mergers and acquisitions or to realize
those savings or revenue enhancements within the expected timeframes; (7) the
level of costs related to the integration of acquired businesses; and (8) the
impact of any divestitures required by regulatory authorities in connection with
mergers or acquisitions.
<PAGE>
FleetBoston Financial
Consolidated Income Statements
($ in millions)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Three Months Ended Year Ended
December 31, December 31, December 31, December 31,
2000 1999 2000 1999
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 1,571 $ 1,688 Net interest income (FTE) $ 6,582 $ 6,799
Noninterest income:
536 708 Capital markets revenue 3,157 2,079
379 405 Investment services revenue 1,704 1,513
357 381 Banking fees and commissions 1,423 1,485
200 196 Credit card revenue 707 737
152 152 Processing-related revenue 609 609
170 106 Other 581 526
----------------------------------------------------------------------------------------------------------------------
1,794 1,948 Total noninterest income 8,181 6,949
----------------------------------------------------------------------------------------------------------------------
3,365 3,636 Total Revenue 14,763 13,748
----------------------------------------------------------------------------------------------------------------------
899 1,197 Employee compensation and benefits 4,513 4,392
113 141 Occupancy 515 566
127 125 Equipment 500 509
89 89 Intangible asset amortization 352 349
622 646 Other 2,526 2,415
----------------------------------------------------------------------------------------------------------------------
1,850 2,198 Total noninterest expense 8,406 8,231
----------------------------------------------------------------------------------------------------------------------
1,515 1,438 Earnings before provision and income taxes 6,357 5,517
285 245 Provision for credit losses 1,196 933
456 467 Income taxes and tax-equivalent adjustment 2,024 1,786
----------------------------------------------------------------------------------------------------------------------
774 726 Net income - Operating 3,137 2,798
----------------------------------------------------------------------------------------------------------------------
- - Divestiture gain, net of tax 420 -
- 760 Integration charges, net of tax 137 760
----------------------------------------------------------------------------------------------------------------------
774 (34) Net income - Reported 3,420 2,038
======================================================================================================================
$ .84 $ .76 Diluted earnings per share - operating $ 3.37 $ 2.91
.84 (.05) Diluted earnings per share - reported 3.68 2.10
</TABLE>
<PAGE>
FleetBoston Financial
Consolidated Balance Sheets
($ in millions)
--------------------------------------------------------------------------------
December 31, December 31,
2000 1999
--------------------------------------------------------------------------------
ASSETS:
Cash and equivalents $ 13,460 $ 12,980
Securities 23,720 25,212
Trading assets 7,081 7,849
Loans and leases 109,372 119,700
Reserve for credit losses (2,378) (2,488)
Due from brokers/dealers 2,986 3,003
Mortgages held for resale 2,077 1,244
Other assets 23,201 23,192
--------------------------------------------------------------------------------
Total assets $ 179,519 $ 190,692
================================================================================
LIABILITIES:
Deposits $ 101,290 $ 114,896
Short-term borrowings 17,862 18,106
Due to brokers/dealers 4,121 4,468
Long-term debt 28,357 25,349
Trading liabilities 2,540 3,807
Other liabilities 9,177 8,759
--------------------------------------------------------------------------------
Total liabilities 163,347 175,385
================================================================================
STOCKHOLDERS' EQUITY:
Preferred stock 566 691
Common stock 15,606 14,616
--------------------------------------------------------------------------------
Total stockholders' equity 16,172 15,307
--------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 179,519 $ 190,692
================================================================================
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Year Ended
December 31, December 31, December 31, December 31,
2000 1999 2000 1999
---------------------------------------------------------------------------------------------------------------------------------
For the Period ($ in millions)
<S> <C> <C> <C>
$ 774 $ 726 Net Income - operating (a) $ 3,137 $ 2,798
- 760 Divestiture Gains/Integration charges, net of tax 283 760
774 (34) Net Income - reported 3,420 2,038
3,365 3,636 Total Revenue (a) 14,763 13,748
1,850 2,198 Total Expense (a) 8,406 8,231
285 245 Provision for Credit Losses 1,196 933
Per Common Share
$ .84 $ .76 Earnings per share - operating (a) $ 3.37 $ 2.91
.84 (.05) Earnings per share - reported 3.68 2.10
.90 .82 Cash earnings per share - operating (a) 3.62 3.15
.33 .30 Cash dividends declared 1.23 1.11
17.21 15.96 Book value (period-end) 17.21 15.96
At Period-End ($ in billions)
$ 179.5 $ 190.7 Assets $ 179.5 $ 190.7
109.4 119.7 Loans 109.4 119.7
101.3 114.9 Deposits 101.3 114.9
16.2 15.3 Total stockholders' equity 16.2 15.3
Ratios
1.73% 1.50% Return on average assets (a) 1.69% 1.48%
20.19 19.61 Return on common equity (a) 21.17 19.52
4.17 4.12 Net interest margin 4.24 4.23
55.0 60.5 Efficiency ratio (a) 56.9 60.0
9.0 8.0 Total equity/assets (period-end) 9.0 8.0
6.6 5.6 Tangible common equity/assets 6.6 5.6
7.9 6.8 Tier 1 risk-based capital ratio 7.9 6.8
12.2 11.5 Total risk-based capital ratio 12.2 11.5
Asset Quality ($ in millions)
$ 925 $ 841 Nonperforming assets $ 925 $ 841
2,378 2,488 Reserve for credit losses 2,378 2,488
.85% .70% Nonperforming assets as a % of loans .85% .70%
2.17 2.08 Reserve for credit losses to period-end loans 2.17 2.08
269 314 Reserve for credit losses to nonperforming loans 269 314
1.01 .82 Net charge-offs/average loans (b) .99 .76
------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Excludes the impact of merger-related charges and other special items.
(b) Excludes the impact of a reserve reduction of approximately $75 million
related to the sale of troubled commercial loans in December 2000.
