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Banking Leaders
After swallowing acquisitions, fat banks worked on digestion

With deals done, merged institutions gazed outward

By Kimberly Blanton, Globe Staff

There was but one way to describe New England's banks last year: fat and happy.

Bank profits and revenues rose. Stock prices were up, too. While the acquisition frenzy marking 1995 had all but subsided, the region's two biggest banks in 1996 set about the complex task of putting their houses in order after major acquisitions.

In May, Fleet Financial Group Inc., New England's biggest banking company with $85.5 billion in assets, closed a deal to acquire NatWest Bancorp., only five months after completing its purchase of Shawmut National Corp.

BankBoston Corp., the region's second biggest bank with $62.3 billion in assets, wrapped up its acquisitions of BayBanks Inc. and South Boston Savings Bank in the summer of 1996.

In 1996, ``the big guys were in a digestive mode,'' said Thomas F. Theurkauf Jr., Keefe Bruyette &Woodsanalyst. ``Arguably, that phase is behind us now and both Fleet and BankBoston have more of an outward focus.''

That focus includes heavier marketing and, possibly, a resumption of acquisitions in coming months, Theurkauf said.

Last year, BankBoston's housekeeping included appointing a new president, Henrique de Campos Meirelles, the former head of the bank's growing Brazilian operations.

The company also shrank staff after the BayBanks merger, spun off a mortgage subsidiary, and issued stock options to employees.

``The integration is only being completed now,'' said Karen Schwartzman, BankBoston spokeswoman. ``It was not a quiet year.''

BankBoston's financial performance was better than it appeared at first blush. A $180 million restructuring charge for the acquisition of BayBanks reduced 1996 net income to $650 million, down from $678 million in 1995.

The bank also paid for its heavy presence in Latin America, where declining interest rates reduced interest income. BankBoston finished near the bottom of the Globe 100, ranking 86th.

However, its stock price surged 39 percent, beating the 33 percent rise in stocks of US superregional banks. Net income in the fourth quarter alone surpassed the $200 million mark for the first time. And profits from Latin America were up for the year.

Boston-based Fleet, after buying Shawmut and NatWest, also focused on operational changes, ranging from moves such as expanding the investment business to opening a branch in the Roxbury neighborhood of Boston.

Fleet Financial's 1996 profits surged by 87 percent, helping elevate the company to No. 7 slot in the Globe 100.

Fleet, spokesman James Mahoney said, ``had a very dramatic surge in earnings as a result of the assembled franchise.''

While Fleet and BankBoston were absorbing acquisitions, State Street Corp. was fending off a potential takeover threat. Bank of New York, whose interest State Street had sought to discourage, is still battling Massachusetts regulators, challenging their denial of its request to acquire a large block of State Street stock.

State Street, which specializes in custody accounts for major institutional investors, enjoyed an 18 percent rise in profits, to $293 million last year. The bank's consistently strong financial results last year gave it a ranking of 28 in the Globe 100.

SIS Bancorp Inc., parent company of SIS Bank in Springfield, also posted an impressive performance. The company, which went public in 1995 and stemmed a string of yearly losses, has been improving under its president, William Marshall Jr.

In 1996, SIS Bancorp's profits increased 58 percent, to $18.2 million. Return on average assets, at 1.35 percent, topped the charts among Massachusetts banks with $1 billion or more in assets.

``It's a great turnaround story,'' said James Moynihan, senior vice president of the Boston financial firm, Advest Inc.

Bigger banks followed: Fleet was second, with 1.25 percent return on assets; UST Corp., the state's fourth-biggest bank, was third with a 1.21 percent return on assets.

Although big-bank mergers slowed last year, small banks continued to be targets for potential takeovers. That helped drive up their stock prices, Moynihan said.

This story ran in the Boston Globe on 05/20/97.
© Copyright 1997 Globe Newspaper Company.


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