Fleet to Sell Robbie Stephens, Profits Up
By Mary Kelleher
NEW YORK (Reuters) - FleetBoston Financial Corp. (NYSE:FBF - news) on Tuesday said it will sell its Robertson Stephens investment bank and stop investing in Latin America, to focus on less risky operations like personal financial services and business banking.
The Boston-based company, the seventh-largest bank in the United States, announced the moves as it reported a rise in first-quarter net income from a year earlier, when it took hefty charges. Its stock rose more than 7 percent, or $2.42 a share, to $35.90 on the New York Stock Exchange.
Fleet also plans to sell its AFSA student loan servicing business and cut its investment portfolio over the next two years to $2.5 billion to combat unwieldy write-downs. The portfolio has had slack results too.
``I love it,'' said U.S. Bancorp Piper Jaffray analyst Andy Collins. ``What we've been looking for them to do for quite some time is get back to the basics.''
Wall Street has criticized FleetBoston, formed from the 1999 merger of Fleet and BankBoston, for being in too many disparate businesses, leaving it open to multiple losses.
Economic turmoil in Argentina left the bank with steep loan and currency losses. Fleet gained extensive operations in Argentina and Brazil when it bought BankBoston, whose roots in Argentina date back to 1917 when it opened an office to help New England wool merchants with trade there.
At home, results have been sluggish at its investments arm and at Robertson Stephens, a West Coast investment bank specializing in the technology sector. BankBoston also owned Robertson Stephens before the merger.
TOUGH TIMES FOR SOME BUSINESSES
``We emerged from 2001 with a much clearer understanding of our core strengths, our competitive advantages, and opportunities for growth,'' Fleet Chief Financial Officer Eugene McQuade told analysts on a conference call. ``With the recognition that too much of our capital and resources are consumed by areas with a disproportionate amount of risk and volatility that have weighed on the valuation of our stock.''
Fleet shares fell about 4 percent in the first quarter, underperforming the Standard & Poor's bank stock index (^GSPBK - news), which was up about 8 percent. Fleet President and Chief Executive Chad Gifford, who led BankBoston before the merger, also took over at the start of the first quarter.
The sluggish U.S. economy has hurt stock markets and Wall Street investment banks that advise on mergers and new stock offerings. Robertson Stephens, smaller than many of its rivals, suffered from the collapse of technology stocks. The stock market slump also forced FleetBoston, like many others, to take write-downs in its investments arm.
``Robertson was very profitable in 1998 through 2000,'' Gifford said. ``But the market turned negative in 2001 and it is increasingly clear that the advantage in the future will accrue to the large diversified investment banking firms.''
FleetBoston posted first-quarter net income of $735 million, or 70 cents a share, as it forecast it would. Profits were up from $142 million, or 12 cents a share, a year earlier, when it took $642 million in after-tax charges.
First quarter 2001 earnings were 71 cents a share before special items that included charges for purchasing Summit Bancorp, selling Fleet's mortgage arm and restructuring Robertson Stephens and the Quick & Reilly online brokerage.
IMPROVED RESULTS
In the latest quarter, the company benefited from better cash management revenues, expense control and improved consumer and wholesale banking results, as well as fewer write-downs at its investments arm.
Those offset costs to protect against problem loans and a drop in earnings in Argentina, where the bank has extensive operations.
After loan and currency losses in Argentina, Fleet said on Tuesday it will work to reduce its exposure in Latin America.
``Our patience is not limitless,'' Gifford said.
Fallout from Argentina cut Fleet's equity by $175 million in the first quarter, although the unit posted a modest overall operating profit. Argentina also cost the bank $538 million in the fourth quarter. Its Argentine loan book is down to about $4.5 billion from nearly $7 billion at the end of the year, while its assets there now stand at $6 billion compared with more than $9 million at year-end, McQuade told analysts.
The company also plans to exit its Asian bonds business, where it is not big enough to compete.
In the United States, Fleet said it will work with Robertson management to find a buyer, and try to scale back its investment arm to cut back on risk. This portfolio stood at $4.5 billion at the end of 2000. Start-up technology companies boomed in the late 1990s then failed or yanked plans to sell stock to the public in the market slump. This has hurt banks that took early stakes in them.
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BTW, FBF's up 2.72 (+8.12%) at 36.20. The street must REALLY like this news. |
