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  • The Boston Globe OnlineBoston.com Boston Globe Online / Business / Globe 100
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    Fleet-BankBoston deal sculpts new terrain for region's banks

    Citizens, other see fertile ground plowed by merger

    By Lynnley Browning, Globe Staff, 05/18/99

    ankers might as well be geologists these days - especially in New England, where the industry's landscape is in the midst of its greatest upheaval since earlier this decade, when a regional recession threatened to bury local financial institutions.

    With a new giant about to take shape as Fleet Financial Group Inc. and BankBoston Corp. prepare to merge, the financial terrain in the six-state region is rapidly acquiring new contours, with big implications for consumers and investors.

    It is not just that the combined Boston-based company will be the nation's eighth-largest bank, with more than $160 billion in assets after divestiture and a formidable array of broad financial services.

    The blockbuster $16 billion merger, years in the coming and sealed in March, is also leading smaller local and larger out-of-area banks to take steps to ensure their own competitive positions in one of banking's most attractive markets.

    With a deal that was in the works months before the merger, Citizens Financial Group Inc. recently snapped up the commercial lending and retail deposit operations of State Street Corp. of Boston, the giant mutual fund processor, record-keeper, and money management company. The move helps reshape Providence-based Citizens from a deposits-oriented bank - the bank of the past - into a more modern bank with broad lending operations and financial services - the bank of the future.

    Smallish Citizens admits it would love to acquire some of the 270 branches with $13.6 billion in deposits and $5 billion in loans that the combined Fleet-BankBoston is required to sell in coming months to meet antitrust guidelines. With bolstered lending operations - something federal regulators are keen to see in whoever acquires the assets - the company may be better positioned to make a bid.

    But privately owned Citizens - to be the region's second-largest bank behind the combined Fleet-BankBoston but still only a fraction of the new behemoth's size - does not plan on becoming a giant. It says it will limit its growth to $50 billion in assets, around two and a half times its current size.

    Still, ''Citizens is a force to be reckoned with,'' said James Moynihan, a senior vice president at Advest Inc., a brokerage. ''They may be a minor force, but they're a very good competitor.''

    UST Corp., a small bank with $6 billion in assets that has bulked up in recent years by acquiring community banks and branches divested from the Bank of Boston-BayBanks merger, is probably not large enough to make a play for the Fleet-BankBoston branches.

    Big banks from North Carolina to New York are also interested in acquiring the soon-to-be-divested assets - interest that could bring an out-of-region player into New England for the first time and pose increased competition to the new giant.

    On the other end of the barbell, community banks, including Independent Bank Corp., Andover Bancorp Inc., and First Essex Bancorp Inc., are hoping to pick up customers if Fleet and BankBoston's integration causes service disruptions.

    In the end, all of the acquisition activity - part of a trend of growing consolidation among banks across the nation - has greatly winnowed the number of institutions in New England. Yet many of those left in Massachusetts, which has a particularly strong concentration of savings and loans and thrifts, are thriving: Lawrence Savings Bank posted net income of $8.8 million on revenues of $12.7 million, for example.

    But mostly the activity has fueled the indomitable rise of Fleet.

    Once a tiny bank in the smallest state in the nation (Rhode Island), Fleet, which is technically acquiring BankBoston, has grown through nearly 50 acquisitions over a decade to become the survivor in the region's banking wars.

    ''Fleet,'' Moynihan said, ''is the winner in this battle.''

    This story ran on page D30 of the Boston Globe on 05/18/99.
    © Copyright 1999 Globe Newspaper Company.

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