FFCCORC9632 Fleet Annual 2/16Ä - Corporate

1999 Summary Annual Report
Diversified Strengths.
Dynamic Opportunities.
Table of Contents
1
Summary of Earnings
2
Letter to Shareholders
5
18
Diversified Strengths. Dynamic Opportunities.
Retail Banking
Money Management
International Banking
Wholesale Banking
24
Financial Overview
28
Board of Directors
29
Officers
30
Principal Operations
31
Stockholder Information
6
10
14
1999 saw the combination of BankBoston Corporation and Fleet Financial Group .
This new financial services powerhouse — FleetBoston Financial — creates an
exceptional company for shareholders and a compelling, full-service franchise for
customers, combining Fleet’s sophisticated set of consumer, money management, and
commercial banking capabilities with BankBoston’s nationally recognized corporate ,
investment, and global banking businesses.
Our strong, diverse business mix will create growth and value, resulting in dynamic
new opportunities for shareholders and customers alike. The theme of this year’s
Summary Annual Report — “Diversified Strengths. Dynamic Opportunities.” —
captures the promise of our new company and the excitement and optimism we
have for the future.
Summary of Earnings
1999
1998
$ 13,773
8,255
933
2,798
$ 11,735
6,832
850
2,459
760
$ 2,038
135
$ 2,324
$
$
Dollars in millions, except per share amounts
For the Year
Total revenue
Noninterest expense
Provision for credit losses
Net income – operating
Merger and related charges and other
special items, net of tax
Net income
Per Common Share
Diluted earnings
Market price (year-end)
Cash dividends declared
Book value (year-end)
2.10
34.81
1.11
15.96
2.41
44.69
1.00
14.70
At Year-End
Assets
Securities
Loans
Reserve for credit losses
Deposits
Short-term borrowings
Long-term debt
Total stockholders’ equity
$190,692
25,212
119,700
2,488
114,896
18,106
25,349
15,307
$177,894
23,369
112,094
2,306
118,178
19,176
14,411
14,204
Ratios
Return on average common equity
Return on average assets
Common dividend payout ratio
Net interest margin
Common equity-to-assets (year-end)
Average total equity-to-assets
14.12%
1.08
51.51
4.23
7.66
7.82
17.64%
1.37
40.15
4.40
7.60
8.03
1999
1998
Selected Financial Highlights – Operating Basis
Per Common Share
Diluted earnings
$
2.91
$
2.55
Ratios
Return on average common equity
Return on average assets
Efficiency ratio
19.52%
1.48
60.0
18.69%
1.44
58.2
Chad Gifford, President and COO
Terry Murray, Chairman and CEO
Dear Shareholder: The histories of two of America’s most respected financial institutions
converged in 1999 with the merger of Fleet Financial Group and BankBoston
Corporation to form FleetBoston Financial. With operating earnings of nearly
$3 billion in 1999, we have already established ourselves as a world-class
competitor and powerful revenue generator, a new brand of growth company
with enormous potential to create value for customers and shareholders alike .
Early last year, when we began discussing
• Return on equity rose to 19.52 percent, and
a possible merger, we had high expectations.
return on assets climbed to 1.48 percent.
The year’s consolidated financial results,
• Of special significance, revenues soared 17
despite intense merger planning and the
percent over the prior year, to approximately
challenges of business integration, have
$14 billion, with fee income accounting for
outpaced our optimistic vision.
51 percent of total revenues, demonstrating
Net income for 1999 was $2.0 billion, or
$2.10 per share, which included merger- and
the diversification and balance this new
franchise represents.
restructuring-related expenses of $760 million (after-tax), versus $2.3 billion, or $2.41
Driven by Diversification
per share, for 1998.
One of the compelling reasons for the
What excites us even more is how we
creation of FleetBoston Financial is the
performed before these expenses:
breadth of its resulting business portfolio.
• Operating earnings for 1999 were a record
We benefit from the power of the company’s
$2.8 billion, or $2.91 per share, a 14 percent
diversified earnings stream, where no single
increase over 1998.
source accounts for more than 20 percent of
earnings. The power of the resulting balance
at cyclical lows along with the rest of the
1999 Pro Forma Earnings Mix
was evident, as businesses operating in all
industry. Economic concerns, especially rising
(Post-Divestiture)
sectors of our markets posted strong results.
interest rates, have weighed heavily on finan-
• Propelled by strong revenue growth, our
cial-sector stocks, particularly banks. The
Global Banking and Financial Services
relative valuation of bank stocks has now
business recorded a 47 percent earnings
reached its lowest level in more than five years,
gain, reflecting, in large part, outstand-
with average price-to-earnings multiples
ing performance in our corporate and
falling to half that of the S&P 500. We
investment banking, principal investing,
remain confident that, as we successfully
international, and money management areas,
execute our merger integration, complete
and a rebound from the world economic
the industry’s largest branch divestiture,
problems of 1998.
and continue to deliver strong financial
• Commercial and Retail Banking posted
performance, we will attract increased
earnings growth of 15 percent, with
investor interest. We continue to enjoy excel-
increases in our commercial banking,
lent support from the analyst community:
commercial finance, and retail and small
more than 80 percent of the analysts who
business units. In an environment of rising
cover us rated our stock as a “Buy” or
interest rates, we also generated increases
“Outperform” at year-end 1999.
Commercial
Finance 14%
Mortgage &
Credit Card 10%
Commercial
Banking 19%
Investment
Services 13%
Deposit-Taking
Businesses 18%
Other 4%
Principal
Investing 8%
Investment
Banking 4%
Latin America 10%
in short-term deposits, a profitable and
critical source of liquidity for Fleet.
Shaping FleetBoston Financial
• Our National Consumer business posted
FleetBoston Financial creates shareholder
a 68 percent earnings gain. This was due
value by providing a more comprehensive
in large part to the strength of the business
set of services to more customers. To
turnaround we engineered in our credit
BankBoston’s customers, the alliance brings a
card business, acquired from Advanta in
superior array of technologically sophisticated
1998, and the strong performance of Fleet
and innovative cash management, brokerage,
Mortgage Group.
and consumer banking products. To Fleet’s
Our integration is well under way and
customers, the combination delivers paceset-
on track to deliver the financial benefits we
ting electronic banking access, nationally
predicted. We projected annual savings of
recognized investment banking and capital
$600 million, and, during the first three
markets capabilities, and access to some of
months of operations, had already realized
the world’s most dynamic global markets.
an annualized equivalent of $100 million.
The result is a financial institution armed
As mandated by our regulators, we will be
with five critical success competencies —
divesting 306 branches in New England, rep-
retail banking, money management, inter-
resenting the sale of $13 billion in deposits.
national banking, commercial banking, and
Our only disappointment during the
investment banking — which are highlighted
year has been our stock price. Despite our
in the feature section of this report, begin-
strong performance and the substantial
ning on page 5.
progress we continue to make in combining
We were among the first financial insti-
our two organizations, our stock price has not
tutions to recognize the sweeping power
reflected this success and has been trading
of the Internet, and continue to move
LET TER TO SHAREHOLDERS 3
4 LET TER TO SHAREHOLDERS
aggressively to exploit the opportunities it
teams and boards in the financial services
offers. Information Week recognized Fleet
industry. We are delighted by the high degree
and one of our subsidiaries, Fleet Capital
of teamwork exhibited by this unified group.
Leasing, as an “E-Business 100” company.
For years, we respected one another as
Our corporate “e-catalyst” is rapidly and
competitors. Now we are discovering that,
aggressively developing a comprehensive
as we learn from one another and work
strategy around the Internet and coordinat-
together as partners, we are an exceptionally
ing the innovative e-commerce initiatives of
powerful alliance.
each line of business, including leveraging
Finally, of critical importance to all our
the power of our own electronic platforms
efforts, from the ongoing integration to the
and forging groundbreaking partnerships
long-term success of FleetBoston Financial,
with companies that are shaping the future
are the talents of our employees. As a
of the Internet.
winning, growing, global company, Fleet
Our determination to ensure that a
creates significant and attractive career
world-class bank remain headquartered in
opportunities in an environment that is
New England was one of the driving forces
productive and supportive of employees’
behind our merger. Both banks had long
needs. As in all aspects of the combination,
records of innovative community involve-
we have adopted best practices from each
ment. Working closely with community
organization. We have upgraded employee
stakeholders, we made a five-year commit-
policies, compensation, and benefits
ment of $14.6 billion, which includes
programs; expanded training and leadership
specific initiatives targeted to low- and mod-
development opportunities; and continued
erate-income families, small businesses, and
our commitment to flex-time strategies and
neighborhood revitalization. This multi-year,
work/life integration — aspiring to repeat
multi-billion-dollar commitment extends
the 1999 recognition of Fleet as one of the
our community involvement, based largely
“100 Best Companies for Working Mothers”
on BankBoston’s nationally recognized
by Working Mother magazine.
urban business model. Its highly successful
We are already building on 1999’s
community banking and development
accomplishments, performance, and momen-
strategies were recognized in 1999 with the
tum, and look forward to a year of excep-
esteemed Ron Brown Award for Corporate
tional promise for an exceptional company.
Leadership. We also announced a $100 mil-
Propelled by one of the country’s most
lion charitable foundation that will further
complete sets of financial services offerings,
strengthen our bond with our communities.
and guided by one of its strongest manage-
At the end of this remarkable year,
ment teams, FleetBoston Financial has only
we offer our deep appreciation to all the
just begun to demonstrate its potential for
directors of Fleet and BankBoston, who
growth and value creation. We approach the
embraced our vision and its potential to
future with great confidence and enthusiasm.
create value for shareholders. One of the
challenges of integrating our two organiza-
Sincerely,
tions was the selection of a management
team and Board of Directors. Both companies possessed a wealth of talented leaders,
Terry Murray
Chad Gifford
yielding one of the strongest management
Chairman and CEO
President and COO
5
FleetBoston Financial: Diversified Strengths. Dynamic Opportunities .
Financial institutions must possess strength in five critical competencies to compete in
the new economy —— competencies that clearly distinguish FleetBoston Financial:
• Retail Banking
• Money Management
• International Banking
• Commercial Banking
• Investment Banking
Armed with a diverse and complementary portfolio of businesses, Fleet is demonstrating how to leverage these strengths to build customer relationships that are the source
of enduring shareholder value. In the pages that follow, we examine Fleet’s competitive
power through the lens of these competencies and the opportunities they provide for
customers, combining commercial and investment banking into Wholesale Banking to
reflect the highly integrated capabilities we deliver to our corporate clients.
Retail
Banking
Access, Innovation, and
Expertise — Anywhere,
Anytime
Fleet possesses one of the premier retail banking franchises in the
country. We serve small businesses and consumers through nearly
5,000 branches and ATMs from Maine to New Jersey, as well as
through one of the nation’s most sophisticated Web-banking capa bilities. Fleet’s reach across the Northeast region, small business
expertise, and national consumer credit and mortgage capabilities ,
combined with BankBoston’s unmatched penetration of the highly
attractive Massachusetts market and electronic banking excellence ,
make retail banking one of our company’s distinctive drivers of value .
7
The access and sophistication of HomeLink has made it a customer favorite.
One of the Nation’s Largest and Most Innovative Retail Banks
• Nearly 8 million consumer households and approximately $43 billion
in deposits (post-divestiture)
• 400,000 small business customers in the Northeast and Florida
• #1 deposit share in New England, #4 in New Jersey, and #8 in New York
• 1,260 branches and 3,500 ATM machines (post-divestiture)
• 1,000 licensed mutual fund and annuity representatives in branches
• Integrated, Web-based banking and brokerage with more than 640,000 users
• #1 small business lender in the Northeast
• #1 SBA lender in the Northeast and #4 nationally
• #1 home equity lender in New England and #8 nationally
• #1 education lender in New England and #9 nationally
A young couple celebrates their dream come true, made affordable by a Fleet mortgage for first-time homebuyers.
Inset top: U.S. consumers use a Fleet credit card more than 400,000 times a day.
Inset bottom: A 20-year banking relationship with Fleet’s Small Business Services has helped the Impact Group become a leader in medical
education. (Shown: Fleet’s Carmen Gomez and Impact chief Howard Kroplick.)
Putting Innovation and Access at
wide survey. Specializing in companies with
Customers’ Fingertips
sales under $10 million, small business
The heart of Fleet’s dynamic retail strategy is
experts in our 400 in-branch Business
our ability to anticipate and respond to the
Solutions Centers bring “best-in-class”
evolving needs of customers and develop
services to our customers. For example, we
innovative new capabilities to improve their
offer enhanced on-line banking through
experience with us. Through a comprehensive,
OfficeLink ; help small business customers
multi-channel delivery system, customers can
develop a presence on the Internet through
access a broad array of products and services
storefronts@fleet; and provide telephone
and the expertise required to address their
banking staffed by a specially trained team
financial needs. Within our seven-state
of business specialists. In addition, we’ve
“footprint,” we have built a significant share
developed innovative partnerships through
of retail deposits, including the #1 share in
our Women Entrepreneurs’ Connection
Massachusetts, Connecticut, and Rhode
to help women business owners and assist
Island, with a growing share in New York
aspiring women entrepreneurs.
SM
and New Jersey. Our competitive appeal is
significantly enhanced by a “card-centric”
Meeting Consumer Credit and Mortgage
approach that makes each customer’s ATM
Needs Nationally
card number the key that unlocks our
We provide a comprehensive array of credit
market’s largest ATM network, the infor-
card and mortgage products and services
mation resources of “24/7” telephone banking,
specifically tailored to consumers, small
and on-line banking.
businesses, and entrepreneurs. In 1999, Fleet
While these channels all offer a broad
Credit Card Services became the eighth-
range of innovative banking products,
largest bank credit card issuer in the country.
one channel — on-line financial services
The group recorded an exceptional year by
— represents real industry leadership.
improving customer retention and service
BankBoston’s HomeLink Internet banking
and initiating a number of innovative on-line
product, which achieved the highest per-
alliances to market the Fleet credit card.
SM
centage customer penetration of any such
Fleet Mortgage Group is the country’s
service in the nation, has become the
sixth-largest mortgage lender, and a leading
foundation of an aggressive effort to elec-
mortgage provider in every Northeastern
tronically expand the complete range of
state where we maintain a retail presence.
Fleet’s services. For example, the integra-
Through innovative Internet-based products
tion of HomeLink with our Quick & Reilly
and streamlined application and processing
discount brokerage capabilities appeals to
procedures, we differentiate ourselves
customers who want on-line access to all
nationally by satisfying consumers’ mortgage
their financial assets, and to investment
needs with greater speed and convenience.
research and financial management expertise through a single, integrated Web site.
Boosted by direct mail and Internet
access, Fleet is aggressively building on its
#1 share in New England’s home equity and
A Leading Provider of Small Business
education loan markets, and moving up the
Banking Solutions
ranks of the top-10 national providers.
In 1999, Fleet was named the #1 bank for
small business in an independent, nation-
RETAIL BANKING 9
Delivering Expertise
and Performance to
Investors Nationwide
Money
Management
11
Bringing together complementary strengths such as Fleet’s asset
management and brokerage capabilities and BankBoston’s private
banking expertise, FleetBoston Financial offers a comprehensive ,
integrated array of investment-related resources to its clients .
Whether high-net-worth individuals, investment-oriented consumers ,
or institutions, clients can rely on sophisticated investment analysis
and advice, as well as on-line brokerage and other services that
provide immediate access to markets and information.
Quick & Reilly’s Investment Center in New York City is the flagship of a 120-location network.
Personalized Services for High-Net-Worth Clients
Investment Management and Operational
Focused on clients with $1 million or more
Support for Institutional Investors
in investable assets, Fleet’s Private Clients
Through Fleet Investment Advisors (FIA)
Group (PCG) has nearly $50 billion in
and Columbia Management Company, Fleet
assets under management and more than
provides institutional investors, including
20,000 clients. A market leader in New
corporations, municipalities, pension funds,
England, the group is poised for further
and not-for-profit organizations, with a wide
growth in three of the nation’s most affluent
range of investment services, including a full
markets: southern Connecticut, New York,
menu of retirement services from trust and
and New Jersey. Delivering sophisticated,
custody to administration and investment
integrated expertise in credit, estate plan-
management. FIA is the largest provider of
ning, charitable trusts, and tax planning,
investment management services to nonprofit
PCG also provides clients with investment
organizations throughout New England, and
advice and asset management services.
Columbia Management, which operates in
the Pacific Northwest, is the largest asset
Market Access and Financial Opportunities for
manager in that region.
Investment-Oriented Individuals
12 MONEY MANAGEMENT
One of Fleet’s most significant opportunities
The Power of Integrated Investment Capabilities
is targeting the growing number of indi-
To maximize the value of our capabilities
viduals with investable assets of $150,000 to
to shareholders and customers alike, we are
$1 million. To attract these active investors,
developing strategies to integrate these
we deliver market access, investment guid-
businesses in ways that offer powerful solu-
ance, and sophisticated research tools
tions for virtually any customer. For example,
through Quick & Reilly’s investor centers,
retail banking customers can now use
on-line trading services, and Fleet branches
our HomeLink on-line banking product
throughout the Northeast. Investment-
to access Quick & Reilly research and
oriented customers also have access to a
perform transactions, one of the first such
broad array of investment products, includ-
offerings in the nation. In addition, PCG
ing Fleet’s proprietary family of Galaxy
clients benefit from sophisticated investment
mutual funds. Founded more than 25 years
opportunities created by BancBoston Capital,
ago, Quick & Reilly became the first New
one of our two principal investing groups.
York Stock Exchange member firm to offer
In 1999, PCG clients had the opportunity
discounted commissions to individuals, and
to invest in the $300 million Private Equity
is now an industry leader with more than
Portfolio Fund II, which targeted top-tier
1.3 million customers and $36 billion in
venture capital, buyout, and international
customer assets. SURETRADE is at the
private equity investment opportunities.
SM
forefront of the move to on-line brokerage,
with more than 400,000 accounts and
well over $2.5 billion in customer assets, and
U.S. Clearing is one of the nation’s largest
securities clearing companies.
A National Leader in Money Management
• Nearly $120 billion in assets under management through Fleet Investment Advisors and
Columbia Management Company
• The nation’s fifth-largest private bank, and the leader in New England
• More than 1,000 registered representatives
• Quick & Reilly ranked #1 Internet brokerage firm of 1999 by SmartMoney *
• 120 investor centers nationwide
• The second-largest specialist firm on the floor of the New York Stock Exchange,
with 426 issues and nearly 15 percent of total NYSE volume
SM
Galaxy Funds customers can get expert advice on-line, from an investment counselor and from its quarterly newspaper.
*Copyright © 1999 SmartMoney, a joint venture of Hearst Communications, Inc. and Dow Jones & Company, Inc.
International
Banking
Setting World-Class
Standards in Today’s Most
Dynamic Markets
Brazilian customers can access their BankBoston accounts from anywhere in the world
with a handheld computer.
A distinctive Fleet strength is our extensive global banking capabil ity, encompassing more than 250 offices in 24 countries and
territories, and anchored by one of the most extensive Latin
American branch networks of any foreign bank. An area of long-term
investment and strong performance at BankBoston, global banking
is now a significant driver of value for FleetBoston Financial share holders and customers alike.
15
A Leading International Bank
• Third-largest foreign branch network among U.S. banks
• Serving top-tier corporations and high-net-worth consumers in Latin America
• 139 branches in Argentina
• 64 branches in Brazil
• #1 mutual fund manager in Argentina and #6 in Brazil
• The leading provider of wholesale banking services to indigenous and multinational
companies in Brazil
• #4 investment bank for European technology companies
BankBoston Argentina’s branch and ATM networks have grown dramatically from their headquarters, a Buenos Aires landmark since 1924.
A Leader in Latin America…
…and around the Globe
In Argentina, Brazil, Chile, Colombia,
Long accustomed to identifying opportunities
Mexico, Panama, Peru, and Uruguay,
in emerging international markets, we
we continue to operate as “BankBoston,”
repositioned our operations during the
retaining a brand that is among the most
mid-decade turmoil in Asian countries in
recognized and respected in our target
anticipation of the recovery of these eco-
market segments: top-tier corporations and
nomies. Taking advantage of the availability
high-net-worth consumers, who typically
of exceptional talent, we have built a power-
regard us as a local rather than a foreign bank.
ful organization that emphasizes relationships
Disciplined focus and several decades of
with the region’s strongest corporations. Our
experience in this region led to performance
approach focuses on lower-risk, fee-based
that exceeded our ambitious expectations.
businesses such as corporate finance and trade
Earnings in the region grew at a significant
services, and developing stable sources of
double-digit rate — and resulted in record
revenue while establishing our commitment
earnings in 1999.
to the region’s most important exporters.
A true universal bank in Argentina,
In addition, we solidified relationships with
Brazil, and Chile, BankBoston provides a
major U.S. importers of Asian goods. Now,
comprehensive range of financing alterna-
with Asian economies benefiting from a
tives and operating services to leading
dramatic economic turnaround, revenues
indigenous corporations and exporters, and
and earnings in the region are increasing at
to major multinational corporations doing
a double-digit rate.
business in the region.
In recent years, we realigned our
As a major bank for affluent consumers,
European operations to complement tradi-
we enhanced our 1999 performance following
tional corporate banking and to bolster our
a program of aggressive expansion in 1998,
presence as a provider of investment banking
particularly in Argentina and Brazil. In
services and capital for U.S. multinational
addition, we are a leading provider of invest-
companies. Focusing on technology compa-
ment services for affluent market segments,
nies, as well as basic industries, we have
and we are among the leading mutual fund
become one of the continent’s leading
managers in Argentina and Brazil.
private equity investors. In addition, our
Employing a similar “high-end” strategy,
subsidiary Robertson Stephens ranks among
we are beginning to grow in Mexico, serving
Europe’s most active investment banks in
the top echelon of the corporate market. We
the most dynamic segment of the market:
combine our knowledge of the international
high-tech IPOs.
capital and foreign exchange markets with
our extensive experience developing tailored
products for Latin American markets, to
serve Mexico’s best companies.
INTERNATIONAL BANKING 17
Providing Capital and
Ideas for Every Phase
of Growth
Wholesale
Banking
19
In the inextricably interconnected areas of commercial and invest ment banking, FleetBoston Financial unites the exceptional and
complementary strengths of two nationally recognized wholesale
banking players. The new company combines BankBoston’s national
industry-focused relationship banking, investment banking, and
principal investing capabilities with Fleet’s nationally ranked
commercial finance, regional middle-market, and cash management
strengths. The result is a powerful earnings engine: a resource
that a growing number of companies of all sizes rely on for
innovative, customized, and comprehensive financial solutions.
The link between its CFO, Karen Hoguet (right), and Fleet’s account leader, Judy Kelly, is the gateway for Federated Department Stores’
multifaceted relationship with its longtime banking partner.
An Integrated Approach Based on Creativity
includes our asset-based lending activities
and Capital
and leasing — is one of the most significant
Representing the best of the new generation
businesses and distinguishing capabilities of
of commercial and investment banks, Fleet
FleetBoston Financial. Long a recognized
provides a full range of wholesale banking
strength of Fleet, these services are now
services to companies at every stage of
drivers of growth and, with the merger,
growth. Once focused almost exclusively on
businesses of national prominence, growing
traditional lending, and still third-largest
revenues at a double-digit rate annually.
commercial and industrial lender in the
Our goal: to be our preferred clients’
country, we also feature expertise in debt and
lead bank, anticipating and meeting all of
equity capital markets, as well as payment
their financial needs. Clearly the most
and risk management services. We draw
fundamental need is capital, and we have
upon our extensive knowledge of growth
the structuring and capital markets expertise
industries and the needs of middle-market
to address the entire right side of a client’s
companies in the Northeast to bring these
balance sheet. Fleet is also the #3 lead
capabilities together in financial solutions
arranger and loan syndicator for mid-cap
designed to promote our clients’ long-
growth companies.
term growth.
20 WHOLESALE BANKING
This strength in debt-capital-raising is
Fleet provides non-investment-grade
complemented by Robertson Stephens, the
companies in growth industries with finan-
#1 full-service investment bank for growth
cial ideas and solutions shaped by our under-
companies. With 1999 revenues of nearly
standing of the opportunities and challenges
$1 billion — more than double 1998 rev-
they face. We focus on serving the needs of
enues — Robertson Stephens is a leading
the media and entertainment, technology
force in the global high-tech IPO market
and communications, consumer and busi-
and is a major player in mergers and
ness services, energy, utilities, transportation,
acquisitions, completing over $95 billion in
real estate, and healthcare sectors, as well as
transactions during 1999.
financial institutions and multinational cor-
Fleet also differentiates itself by provid-
porations. In the northeastern United States,
ing clients with private equity through its
Fleet is the leading financial services pro-
principal investing areas, as well as investments
vider for companies with revenues ranging
in more than 200 private equity sponsor
from $10 million to $500 million. Our
groups. One of our highest-value-creating
more than 10,000 middle-market clients
businesses, it invests Fleet’s own capital
extend from northern Maine to southern
and manages funds for high-net-worth
New Jersey.
individuals and institutional investors.
We help our customers turn balancesheet assets into cash for expansion, to fund
acquisitions, or to finance operations.
Our commercial finance business — which
(continued on page 22)
A Wholesale Banking Powerhouse
• #3 commercial and industrial lender
• #3 lead arranger overall, and in total loan, agent-only, and leveraged loan syndications
• #1 underwriter of technology equity offerings
• #1 bank-owned asset-based lender
• #2 bank-owned lessor
• #5 bank-owned commercial real estate lender
• #5 cash management provider
• A leading lender to the technology, retail, restaurant, and media industries in the U.S.
• A leading principal investor in technology sectors
Fleet Capital’s leasing expertise is one reason Massachusetts’ EMC Corporation has become the world’s leader in enterprise storage systems.
(Shown: EMC’s Director of Leasing, Tim Connors (left), and Fleet’s Rick Rivers)
Inset: One of the Real Estate Finance Group’s specialties is affordable multifamily housing, like this one under construction in
New York’s Bronx neighborhood.
Services that Strengthen Our Ties to Customers
Because the economy has become global,
all of our wholesale banking clients are
prospects for foreign exchange and derivative products. We are already one of the
nation’s top-10 providers of foreign exchange
solutions and interest-rate risk management
solutions, with trading facilities in London
and Singapore as well as Boston. And we
have plans for continued dramatic growth.
While these businesses are traditionally
regarded as transaction-driven, we differentiate ourselves by providing risk-management
expertise and solutions tailored to the needs
of each client.
Cash management and trade services
are a significant competitive advantage at
Fleet, and two of our most impressive drivers
of fee income. More than 500,000 corporate
clients—from small businesses to Fortune 500
companies —rely on us for a range of technology-driven cash management services,
making us the fifth-largest provider of these
transaction and information services in the
nation. Our trade services capabilities, which
22 WHOLESALE BANKING
integrate closely with our presence and
expertise in Latin America, Asia, and
Europe, are similarly ranked, and we are the
leading provider of letters of credit in the
vibrant New England import/export market.
Officers of FirePond gather on the trading floor of Robertson Stephens in San Francisco to watch their IPO take off in the market
24 FINANCIAL OVERVIEW
Financial Overview
On October 1, 1999, BankBoston merged with
Fleet Financial Group. The merger was
accounted for as a pooling of interests and,
as such, financial information included in
this report presents the combined financial
condition and results of operations of both
companies as if they had operated as a
combined entity for all periods presented.
The Corporation’s operating earnings
were $2.8 billion, or $2.91 per diluted share, in
1999, a 14% increase over operating earnings
of $2.5 billion, or $2.55 per diluted share, in
1998. ROA and ROE, on an operating basis,
were 1.48% and 19.52%, respectively, in 1999
and 1.44% and 18.69%, respectively, in 1998.
In connection with the BankBoston
merger, the Corporation recorded merger and
related charges and other special items of
$1.1 billion ($760 million after-tax) in the
fourth quarter of 1999. In 1998, merger and
related charges and other special items were
recorded in connection with the Corporation’s
acquisitions of Quick & Reilly and Robertson
Stephens, as well as a realignment of the
Corporation’s Asian operations and reductions
in staff in its Emerging Market Sales, Trading
and Research unit.
Net income was $2.0 billion, including
the effects of the merger and related charges
and other special items described below, or
$2.10 per diluted share, for 1999, compared
with $2.3 billion, or $2.41 per diluted share,
for 1998. Return on assets (ROA) and return
on common equity (ROE) were 1.08% and
14.12%, respectively, in 1999, compared to
1.37% and 17.64%, respectively, in 1998.
In connection with obtaining regulatory
approvals for the merger with BankBoston,
the Corporation agreed to divest $13 billion
of deposits and $9 billion of loans. These
divestitures will occur in 2000, and are expected to result in an annualized net income reduction of approximately $160 million, part of
which will impact 2000.
Offsetting this reduction, the Corporation
expects to achieve total annual cost savings
of $600 million in connection with the integration of Fleet and BankBoston. The integration
process is well under way, and major systems
conversions are expected to be completed in
2000. The Corporation expects to complete its
actions related to achieving these cost savings
by the end of 2000, and as of year-end 1999
had achieved annualized cost savings of
approximately $100 million. The Corporation’s
expectations with respect to divestitures and
cost savings are forward-looking statements,
and actual results of these actions could differ
materially from expected amounts.
Net interest income on a fully taxable
equivalent (FTE) basis totaled $6.8 billion
for 1999, compared to $6.5 billion for 1998.
This increase was principally attributable to
an increase in average loans and leases of
$6.5 billion, which primarily resulted from the
acquisition of Sanwa Business Credit (Sanwa)
in February 1999. Net interest margin for 1999
was 4.23%, a decline from 4.40% in 1998,
primarily attributable to a higher level of
low-yield earning assets necessary to support
an expanded investment banking operation.
The provision for credit losses was
$933 million in 1999, compared to $850 million
in 1998. Net charge-offs totaled $896 million
in 1999, compared to $834 million in 1998.
The increase in both provision and charge-offs
was principally the result of the acquisition of
Sanwa, as well as higher credit losses in the
domestic commercial and international consumer loan portfolios.
Noninterest income increased $1.7 billion
to $7.0 billion in 1999. Increases were noted
in all revenue categories, in particular capital
markets, investment services, credit card and
processing-related revenues. Strong growth was
noted over 1998 as a result of the acquisition of
Robertson Stephens in mid-1998 and growth
within existing and acquired businesses.
Noninterest expense, on an operating
basis, totaled $8.3 billion for 1999, compared
with $6.8 billion in 1998, resulting primarily
from the aforementioned acquisitions, growth
in existing businesses and a rise in compensation
expense due to incentive payments related to
percentage of total assets, were .70% and
higher revenue levels.
.44%, respectively, at December 31, 1999,
Nonperforming assets (NPAs) totaled
$841 million at December 31, 1999, compared
compared to .61% and .38%, respectively, at
December 31, 1998.
to $684 million at December 31, 1998. The
Total stockholders’ equity was $15.3 bil-
increase was composed of a $93 million
lion and $14.2 billion at December 31, 1999
increase in domestic NPAs, which resulted
and 1998, respectively, representing 8.0% of
from increased commercial NPAs offset by
period-end assets. Book value per common
lower consumer NPAs, and a $64 million
share rose to $15.96 at December 31, 1999.
increase in international NPAs. NPAs
Total assets amounted to $190.7 billion at
as a percentage of total loans, and as a
December 31, 1999.
Report of Independent Accountants
To the Board of Directors and
Stockholders of Fleet Boston Corporation:
We have audited, in accordance with auditing standards generally accepted in the United
States, the consolidated financial statements of Fleet Boston Corporation and its subsidiaries
at December 31, 1999 and 1998, and for each of the three years in the period ended December
31, 1999 (which statements are not presented herein); in our report dated January 19, 2000,
we expressed an unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated balance sheets
as of December 31, 1999 and 1998 and the related condensed consolidated statements
of income for each of the three years in the period ended December 31, 1999, when read in
conjunction with the consolidated financial statements from which it has been derived, is
fairly stated in all material respects in relation thereto.
Boston, Massachusetts
January 19, 2000
FINANCIAL OVERVIEW 25
Condensed Consolidated Statements of Income
1999
1998
1997
$ 6,742
933
5,809
$6,395
850
5,545
$6,128
522
5,606
Noninterest income:
Capital markets revenue
Investment services revenue
Banking fees and commissions
Credit card revenue
Processing-related revenue
Other
Total noninterest income
2,104
1,513
1,501
737
609
510
6,974
1,140
1,212
1,339
455
452
683
5,281
914
990
1,207
98
469
528
4,206
Noninterest expense:
Employee compensation and benefits
Occupancy
Equipment
Intangible asset amortization
Merger- and restructuring-related charges
Other
Total noninterest expense
4,568
586
528
349
850
2,476
9,357
3,556
529
474
274
138
2,079
7,050
3,031
498
463
206
25
1,827
6,050
Income before income taxes
Applicable income taxes
Net income
3,426
1,388
$2,038
3,776
1,452
$2,324
3,762
1,516
$2,246
Weighted average common shares outstanding (in millions)
Net income applicable to common shares
Diluted earnings per share
Basic earnings per share
943.5
$ 1,982
2.10
2.16
939.1
$2,264
2.41
2.47
924.0
$2,153
2.33
2.39
Year ended December 31
Dollars in millions, except per share amounts
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
26
Refer to the Corporation’s 1999 Annual Report on Form 10-K for a complete set of consolidated financial statements.
Condensed Consolidated Balance Sheets
December 31
In millions
1999
1998
Assets
Cash and cash equivalents
Trading assets
Securities
Loans
Reserve for credit losses
Due from brokers/dealers
Mortgages held for resale
Other assets
Total assets
$ 12,980
7,849
25,212
119,700
(2,488)
3,003
1,244
23,192
$190,692
$ 13,507
4,364
23,369
112,094
(2,306)
3,600
4,068
19,198
$177,894
$ 98,201
16,695
114,896
18,106
3,807
4,468
25,349
8,759
175,385
$100,785
17,393
118,178
19,176
2,326
3,975
14,411
5,624
163,690
691
14,616
15,307
$190,692
691
13,513
14,204
$177,894
Liabilities
Deposits:
Domestic
International
Total deposits
Short-term borrowings
Trading liabilities
Due to brokers/dealers
Long-term debt
Accrued expenses and other liabilities
Total liabilities
Stockholders’ equity
Preferred
Common
Total stockholders’ equity
Total liabilities and stockholders’ equity
Refer to the Corporation’s 1999 Annual Report on Form 10-K for a complete set of consolidated financial statements.
Board of Directors
Terrence Murray
Chairman and Chief Executive Officer
FleetBoston Financial
Charles K. Gifford
President and Chief Operating Officer
FleetBoston Financial
Joel B. Alvord
President and Managing Partner
Shawmut Capital Partners, Inc.
William Barnet, III
President and Chief Executive Officer
William Barnet & Son, Inc.
Daniel P. Burnham
Chairman and Chief Executive Officer
Raytheon Company
Paul J. Choquette, Jr.
Chairman and Chief Executive Officer
Gilbane Building Company
John T. Collins
Chairman and Chief Executive Officer
The Collins Group, Inc.
28 BOARD OF DIRECTORS
William F. Connell
Chairman and Chief Executive Officer
Connell Limited Partnership
Gary L. Countryman
Chairman
Liberty Mutual Insurance Company
Alice F. Emerson
Senior Advisor
The Andrew W. Mellon Foundation
President Emerita
Wheaton College
James F. Hardymon
Retired Chairman and
Chief Executive Officer
Textron, Inc.
Marian L. Heard
President and Chief Executive Officer
United Way of Massachusetts Bay
Robert J. Higgins
President, Commercial and
Retail Banking
FleetBoston Financial
Robert M. Kavner
Vice Chairman
idealab!
Thomas J. May
Chairman and Chief Executive Officer
NSTAR
Donald F. McHenry
University Research Professor of
Diplomacy and International Relations
Georgetown University
President
The IRC Group
Henrique de Campos Meirelles
President, Global Banking and
Financial Services
FleetBoston Financial
Michael B. Picotte
President and Chief Executive Officer
The Picotte Companies
Thomas R. Piper
Lawrence E. Fouraker Professor of Business
Administration
Harvard University Graduate School of
Business Administration
Thomas C. Quick
President and Chief Operating Officer
Quick & Reilly/Fleet Securities, Inc.
Francene S. Rodgers
Chief Executive Officer
Work/Family Directions, Inc.
John W. Rowe
Chairman, President and
Chief Executive Officer
Unicom Corp.
Thomas M. Ryan
Chairman and Chief Executive Officer
CVS Corporation
Paul R. Tregurtha
Chairman and Chief Executive Officer
Mormac Marine Group, Inc.
Chairman and Chief Executive Officer
Moran Transportation Company
Officers
Terrence Murray
Chairman and Chief Executive Officer
William C. Mutterperl
Executive Vice President, General
Counsel, and Secretary
Charles K. Gifford
President and Chief Operating Officer
M. Anne Szostak
Executive Vice President
Robert J. Higgins
President, Commercial and Retail Banking
Douglas L. Jacobs
Senior Vice President and Treasurer
Henrique de Campos Meirelles
President, Global Banking and
Financial Services
Erich Schumann
Senior Vice President, Chief
Accounting Officer
Eugene M. McQuade
Vice Chairman and Chief Financial Officer
Gary A. Spiess
Senior Vice President, Senior Deputy
General Counsel, Assistant Secretary
H. Jay Sarles
Vice Chairman, National Financial Services,
and Chief Administrative Officer
David L. Eyles
Vice Chairman and Chief Credit Officer
Paul F. Hogan
Vice Chairman, Corporate/
Investment Banking
Kenneth Sax
Vice President, Operational Assurance
Robert C. Lamb, Jr.
Controller
Edwin J. Santos
Director, Corporate Audit
Peter J. Manning
Vice Chairman
Joseph A. Smialowski
Vice Chairman, Technology/Operations
Bradford H. Warner
Vice Chairman, Investment Services
Anne M. Finucane
Executive Vice President
John L. Mastromarino
Executive Vice President
Brian T. Moynihan
Executive Vice President
OFFICERS 29
Principal Operations
United States
Fleet National Bank
100 Federal Street
Boston, MA 02110
Ph: (617) 434-2200
(617) 346-4000
AFSA Data Corporation
2277 East 220th Street
Long Beach, CA 90810-1690
Ph: (310) 513-2700
BancBoston Capital
175 Federal Street
Boston, MA 02110
Ph: (617) 434-2509
Columbia Management Company
1301 S.W. Fifth Avenue
Portland, OR 97201
Ph: (503) 222-3600
(800) 547-1707
Fleet Bank, N.A.
30 Montgomery Street
Jersey City, NJ 07302
Ph: (212) 907-5000
30 PRINCIPAL OPERATIONS
Fleet Capital
200 Glastonbury Blvd.
Glastonbury, CT 06033
Ph: (860) 659-3200
Fleet Capital Leasing
50 Kennedy Plaza
Providence, RI 02903
Ph: (401) 278-5593
(800) 238-3737
Fleet Credit Card Services, L.P.
101 Gibraltar Road
Horsham, PA 19044
Ph: (215) 957-6800
Fleet Investment Advisors, Inc.
75 State Street
Boston, MA 02109
Ph: (617) 346-4000
Fleet Investment Services, Inc.
75 State Street
Boston, MA 02109
Ph: (617) 346-4000
Fleet Private Equity
(Fleet Equity Partners)
50 Kennedy Plaza
Providence, RI 02903
Ph: (401) 278-6770
Fleet Mortgage Group, Inc.
1333 Main Street
P.O. Box 11988
Columbia, SC 29211
Ph: (803) 929-7900
Quick & Reilly/Fleet Securities, Inc.
26 Broadway
New York, NY 10004
Ph: (212) 747-1200
Robertson Stephens
555 California Street, Suite 2600
San Francisco, CA 94104
Ph: (415) 781-9700
Asia
FleetBoston
150 Beach Road #07-00
GatewayWest
Singapore 0718
Europe
FleetBoston
39 Victoria Street
London SW1H 0ED
England
Argentina
BankBoston
Florida 99
1005 Buenos Aires
Argentina
Brazil
BankBoston
Caixa Postal 8263
Rua Líbero Badaró, 487
01009-000 São Paulo SP
Brazil
Stockholder Information
Stockholder Accounts
The Corporation offers an automatic
dividend reinvestment service, available
upon request, which enables stockholders
to reinvest their quarterly dividends into
shares of the Corporation and/or to make
voluntary cash investments. All brokerage
fees and commissions for these transactions
are absorbed by the Corporation.
If you have any questions regarding your
stockholder account, including address
changes, dividend payments, and the
Corporation’s dividend reinvestment
program, please contact our stock transfer
agent and registrar: First Chicago Trust Co.,
a division of EquiServe, P.O. Box 2500,
Jersey City, NJ 07303-2500, or call toll free
(800) 317-4445. To reach Fleet Boston
Corporation, Shareholder Services, call (800)
944-0786 or (800) 922-6005.
Dividend Disbursing Agent
First Chicago Trust Co., a division
of EquiServe
Independent Accountants
PricewaterhouseCoopers LLP, Boston, MA
Common Stock Data
Traded: New York Stock Exchange (NYSE)
Symbol: FBF
Stockholders of record (12/31/99): 69,549
Shares outstanding (12/31/99): 915,659,602
Annual Meeting Notice
The Annual Meeting of the stockholders
will be held at the World Trade Center,
164 Northern Avenue, Boston, MA, on
Tuesday, April 18, 2000, at 11 a.m.
Investor Information and 10-K Report
General investor information, or a copy of
the Corporation’s Annual Report on Form
10-K for 1999, filed with the Securities and
Exchange Commission, may be obtained
without charge upon written request to:
Fleet Corporate Affairs, P.O. Box 1987,
Boston, MA 02105-1987, or by calling
(617) 434-5498.
Analysts seeking financial information
about the Corporation should contact:
Fleet Boston Corporation
Investor Relations
100 Federal Street
Boston, MA 02106-2016
(617) 434-7858
(617) 434-4981
STOCKHOLDER INFORMATION 31
One Federal Street, Boston, MA 02110-2010
19950/FEB.2000