FleetBoston officials presented rosy financials to shareholders at the bank’s annual meeting last week, but the company’s performance did little to appease those protesting Fleet’s fees outside the meeting.
About 100 members of the National Assistance Corp. of America picketed outside the first shareholders’ meeting since the merger of Fleet and BankBoston, charging that Fleet’s fee structure will raise costs for low- and moderate-income customers. Massachusetts State Police kept the protestors from entering the meeting. The Jamaica Plain-based group protested the merger of the banks and is negotiating with FleetBoston to renew an agreement to fund loans for low-income homebuyers.
Inside the meeting at the World Trade Center in Boston, Chairman and Chief Executive Officer Terrence Murray said that reports of customers being gouged on fees were fueled by misinformation.
“Today this is totally a bogus issue,” Murray said.
Because FleetBoston is keeping the Fleet fee structure, existing Fleet customers will not see their fees change. About two-thirds of BankBoston customers will see no change or will see their fees reduced. The other one-third of BankBoston customers will see fees increase for the accounts they hold, but the bank will work to move customers into accounts that better fit their needs, officials said.
Murray said he expects to see 1 to 2 percent of customers leave the bank because of the merger, less than the usual 2 to 3 percent Fleet experiences when acquiring a commercial bank.
The CEO emphasized the bank’s work with community groups, telling shareholders, “We engage in fruitful, life-enhancing partnerships wherever in the world we do business.”
Earnings Soar
In the first quarter of this year the combined banks posted record earnings of $957 million, a jump of 51 percent from the $661 million Fleet reported in the first quarter of 1999. The bank had merger-related expenses of $149 million in the first quarter, related to combining the companies and the March 24 divestiture of $4 billion in loans and deposits to Sovereign Bancorp. Operating net income, excluding the merger-related expenses, was $808 million in the first quarter, up 28 percent from $661 million the year before.
Like many banks, FleetBoston has seen an increase in fee income as interest rate spreads have dropped. In the first quarter FleetBoston netted $364 million in banking fees and commissions, up from $350 million a year ago. More than half of the bank’s income, 58 percent, came from fee revenue in the first quarter, said Chief Financial Officer Eugene McQuade. The remaining 42 percent came from the interest rate spread.
Chanting NACA members circled outside the conference room where shareholders met, carrying placards and fliers telling bystanders to “Flee Fee Bank.” When Fleet’s meeting ended shareholders were sent out a side door to avoid NACA protestors. Marks said NACA members who own stock were unfairly kept out of the meeting. A Fleet spokesman said the members did not have proper identification.
“They’re afraid,” Marks said. “They can’t stand the confrontation.”
For the last year, Gail Snowden has met with 125 community groups to discuss issues related to the merger. Snowden developed BankBoston’s First Community Bank and serves as managing director for Fleet’s community banking group.
“There’s a lot of misinformation out there we’re going to have to take a lot of time to correct,” Snowden said. “What any one community group does is part of their strategy.”
‘Powerhouse’
FleetBoston President Charles K. Gifford focused on the positive aspects of the merger, which makes the company the top bank-owned, asset-based lender in the country and the third largest commercial and industrial lender. The bank’s Northeast franchise has almost 1,300 branches, and the bank has a strong presence in four of the sixth wealthiest states in the nation.
The bank’s business lines in money management, commercial banking, international banking, capital markets and investment services provide many opportunities for cross marketing, he said.
“In the coming months you’ll begin to see us exploit a number of these opportunities,” Gifford said.
With a base of 2 million customers, some customers are bound to experience problems with the merger, he said.
“This is a very complex process with some inevitable inconveniences to our customers,” Gifford said. “We understand that satisfied customers are the key to any company.”
Murray described FleetBoston as a composite of 18 of the top 25 banks in New England. Murray would not rule out making another acquisition before he leaves his post, but said he is not actively looking for another major transaction.
“The powerhouse that Chad and I envisioned a year ago is proving itself to customers every day,” Murray said. “I firmly believe that over the long term BankBoston and Fleet are going to create far more value together.”
Both Gifford and Murray acknowledged that it was difficult to merge the two Boston banks that were chief rivals for so many years. But by combining the bank can take advantage of new opportunities in areas like e-commerce and international markets.
“We were very different companies,” Murray said. “But the power of this merger comes as much from our differences as from our similarities.”
In the next two years FleetBoston will gain $3 billion in excess capital, Murray said. The capital may be used to acquire businesses he views as “strategic fillers,” such as a leasing business, a money management firm or Latin American firms.
Before the shareholders meeting, the bank’s board of directors authorized the company to buy back up to $2 billion of its common stock. Shareholders approved a measure to change the holding company’s name to FleetBoston Financial.
FleetBoston has $187 billion in assets and is the eighth-largest financial holding company in the United States. Its retail network includes 1,300 U.S. branches and 250 international branches.