Date: Fri 19-Mar-1999

Publication: Bee

Author: CURT

Quick Words:

Fleet-BankBoston-merger

Full Text:

Fleet-BankBoston Merger Could Be Just The Beginning

By Leslie Miller

Associated Press

-- The merger between New England banking powerhouses Fleet Financial Group

and BankBoston may be just a step on the way to the creation of a national

institution.

Even though the $16 billion merger will create the biggest bank in New

England, some analysts said Monday further mergers will be needed for the bank

to compete with other much larger institutions.

"It's the final chapter of bank consolidation as a regional story," said Fred

Breimyer, an economist with State Street Bank. "To go on, they have to go

national."

Fleet's proposed acquisition got an unenthusiastic reception on Wall Street.

Fleet shares fell 5.7 percent, or by $2.56¬ to $42.18‹ a share on the New York

Stock Exchange, where BankBoston nudged up less than 1 percent, or by 12«

cents, to $47.06¬.

Fleet is the nation's ninth largest bank, BankBoston the 15th. The merged

institution, to be called Fleet Boston Corp., will still rank only as the

eighth biggest bank in the country.

With approximately $180 billion in assets, it will be only about one-quarter

the size of such giants as Citigroup and BankAmerica Corp.

"They have staying power where they are, but I believe the bar for scale and

scope of activities is going to continue to be raised over the next couple of

years," said Scott Birbaum, a vice president specializing in banking at Mercer

Management.

"Size alone doesn't matter," said Terrence Murray, Fleet's chairman and chief

executive officer, in a Monday news conference.

"It's where your concentration is, your earnings, where your earnings growth

is accelerating," said Murray, who will become the chairman and CEO of Fleet

Boston Corp.

Fleet brings to the table commercial and mortgage lending, discount brokerage,

student loan processing and a large credit card operation.

BankBoston brings investment banking, corporate lending and extensive Latin

American operations.

"We can do it all, and that's what we intend to do," said Charles K. "Chad"

Gifford, BankBoston's chairman and CEO.

Gifford will become president of the merged institution, then succeed Murray

as CEO after two years.

The merger, valued at $16 billion, will require regulatory and shareholder

approval.

Murray said the deal won't close until late 1999, and consolidation will take

all of 2000. After that, he said, he expects the new institution will make

strategic acquisitions. Analysts predicted those acquisitions could include a

mutual fund company, brokerage firm and insurance company.

But not before divesting about $13 billion in assets, mostly in Massachusetts,

where the state has a deposit cap of $30 billion, $10 billion more than Fleet

Boston Corp. is expected to have.

The Federal Reserve Bank and the US Department of Justice will oversee the

banks' divestiture plans.

Most of the divestitures will take place in Greater Boston, where the two

banks' branches and ATM locations overlap the most, as well as in Providence,

R.I., and Hartford.

"All the community bankers are going to ask, `How do I buy those three

branches that I've had my eye on?'" said James Dwinell, president of Cambridge

Trust Co.

The merger will save about $600 million in operating costs, but will also

eliminate 5,000 of the two institutions' 60,000 positions.

Gifford said he hoped most of the positions would be eliminated through

attrition.

New England bankers welcomed Sunday's merger announcement because it means the

region will continue to be home to a major financial institution.

"To not have a major regional or national bank headquartered in Boston would

be kind of like losing the Red Sox," said James McDonough, president of

Abington Savings Bank.

The deal was praised even in Boston, where Fleet, a brash upstart out of

Providence, R.I., moved across the street from BankBoston after a series of

acquisitions and overshadowed the traditional, Brahmin bank that once served

Paul Revere.

"I think in terms of New England being able to compete with other regions of

the country and other parts of the world, it's important we have one of these

world class financial institutions," said Gov. Paul Cellucci.