Newspaper article The Christian Science Monitor

Merger Improves Outlook for Bank of Boston, Shawmut

Newspaper article The Christian Science Monitor

Merger Improves Outlook for Bank of Boston, Shawmut

Article excerpt

BY merging with Shawmut National Corporation, the Bank of Boston Corporation may once again become New England's largest bank - but probably not its strongest.

The deal, expected to be announced any day, will be the latest in a series of large bank mergers since last April, when Fleet/Norstar Financial Group Inc. won the bidding to acquire the failed Bank of New England.

Unlike the Fleet buyout and other subsequent deals, this one will test the efficiency of "putting two weak banks together - does it make one strong bank?" says James Howell, former chief economist with the Bank of Boston.

Steven Felgran, a finance professor at Northeastern University, says the deal will "produce a bank that will certainly be a more solid institution" than either of the companies would be on their own.

The two banks are struggling under the weight of problem real estate loans. Fleet, based in Providence, R.I., was not hit as hard by the slump. And when Fleet acquired the failed Bank of New England, the federal government took on that bank's bad loans. Fleet leapfrogged Bank of Boston to become the region's largest bank with $48 billion in assets.

If regulators allow the new merger, Shawmut, based in Hartford, Conn., and Bank of Boston will be able to "get back on their feet quicker," says Gerard Cassidy, vice president of Tucker, Anthony, a brokerage house. The banks are expected to close branches where service overlaps and streamline back-office operations, leading to an estimated 3,000 layoffs. But Mr. Cassidy says the cost savings - which he gauges at $280 million annually - would not be realized until 1994, assuming the merger wins final regulatory approval by next June.

The deal may get preliminary approval this week, following a meeting Monday between executives from the two banks and federal regulators at the Office of the Comptroller of the Currency and the Federal Reserve.

Regulatory approval "depends entirely on the extent to which they convince the Comptroller and the Fed that they have adequate capital," says Mr. …

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