FleetBoston Reports First Quarter Earnings of $870 Million or $.79 Per Share; Excluding Charges for the Strategic Repositioning of the Corporation's Business Portfolio

Business Wire, April 17, 2001

Business Editors

BOSTON--(BUSINESS WIRE)--April 17, 2001

FleetBoston Financial (FBF-NYSE) today reported first quarter earnings of $870 million, or $.79 per share, excluding charges related to the strategic repositioning of the Corporation's business portfolio, compared with $.84 in the first quarter of 2000. The difference was primarily the result of the initial period dilution on the acquisition of Summit Bancorp and the impact of the divestitures in 2000 related to the Fleet/BankBoston merger. Return on assets and return on equity for the quarter were 1.64% and 18.2%, respectively. The current and prior period results have been restated to reflect the merger of FleetBoston and Summit Bancorp which closed on March 1, 2001 and which was accounted for using the pooling of interests method.

Additionally, the Corporation had approximately $725 million in three non-recurring charges related to strategic changes in the composition of the company. Details of the various charges incurred during the current quarter are:

--Merger and related expenses of approximately $450 million (after-tax) in connection with the merger of FleetBoston with Summit Bancorp that closed on March 1, including the previously announced downsizing of the Summit balance sheet. The Corporation is raising its cost savings target from this merger to $300 million from $275 million (pre-tax).

--A loss of $225 million (after-tax) from the recently announced sale of Fleet Mortgage Group, the Corporation's mortgage servicing operation.

--A charge of approximately $50 million (after-tax) related to restructuring and downsizing at Robertson Stephens and Quick & Reilly, which reflects the current slowdown in the capital markets.

Including the impact of these charges, net income in the first quarter of 2001 was $142 million, or $.12 per share compared with net income of $1,076 million, or $.97 per share, in the prior year which included approximately $150 million of gains from divestitures to Sovereign Bancorp, net of expenses associated with the merger of Fleet and BankBoston.

Terrence Murray, Chairman and Chief Executive Officer of FleetBoston commented, "The U.S. economic downturn presented the financial services industry with a very tough environment in the first quarter, particularly for our capital markets businesses, which experienced a sharp decline in earnings from the robust setting of a year ago. The earnings contribution from the Principal Investing, Robertson Stephens and Quick & Reilly businesses declined approximately $400 million ($.36 per share) from the prior year. While the slowness in capital markets may get all the headlines, first quarter results are a demonstration of the diversity and financial capacity of our franchise. We intend to use 2001 as a year to focus on executing our strategy of getting the most out of what we have built over the last several years. This will be done not only by placing a much greater emphasis on serving our customers, but also by taking action to invest in those businesses that offer the greatest potential for maximizing shareholder value and, as illustrated by the announced sale of our mortgage company and a number of other non-strategic businesses this quarter, scaling back or divesting those businesses that do not. I'd also like to take the opportunity to welcome Summit Bancorp into the FleetBoston franchise. We feel that Summit is a terrific franchise extension and we look forward to capitalizing on our new #1 market share position in New Jersey."

Chad Gifford, President and Chief Operating Officer said, "Compared with last year, many of our traditional banking businesses posted improved earnings, including Commercial Finance, Asset Management, Consumer Lending, Credit Card, International and Fleet Meehan Specialist. As Terry mentioned, with the massive work of integrating Fleet and BankBoston behind us, we now have the ability to devote much more of our attention to executing and focusing on our customers. This will be a major priority of mine in 2001 and will be a top priority for each and every one of our associates. We look forward to the challenge of strengthening FleetBoston's position as one of the country's leading financial services companies."

First Quarter Financial Highlights

During the first quarter, the U.S. economy slowed notably and various stock indices declined significantly, creating one of the toughest market environments that has been seen in many years. As a result, revenue in the current quarter was $3.73 billion, down $795 million from the prior year. This was in sharp contrast to the first quarter of 2000 when the markets were exceedingly strong and record capital markets revenues were posted. Included in first quarter earnings were $198 million of pre-tax gains related to payments received from Sovereign Bancorp on last year's divestitures and the sale of securities and of several small businesses. Offsetting these gains were $132 million of writedowns to the carrying value of investments contained in the principal investing portfolio and a provision for credit losses, which exceeded net chargeoffs by $45 million.