- The Washington Times - Tuesday, January 15, 2002

From combined dispatches
FleetBoston Financial Corp. raised more red flags about its exposure to the Argentine financial crisis yesterday, postponing its fourth-quarter earnings announcement while it gets a handle on its exposure there.
Analysts said worries about the crisis are already priced into FleetBoston's stock, which rose 9 cents to close at $33.51 on the New York Stock Exchange but has fallen from a high of more $38 last month.
"There's a very large, uncertain cloud that's hanging over Fleet's head that people want resolved," said Gerard Cassidy, banking analyst at RBC Capital Markets in Portland, Maine.
The Boston-based bank had planned to announce fourth-quarter earnings Wednesday. It said yesterday it now planned to report its results later this month.
The Argentine crisis involves "many complex issues" and "the additional time will permit a fuller understanding of the government's new economic programs, as well as a more informed dialogue with the investment community on its impact," FleetBoston Chief Financial Officer Eugene M. McQuade said in a prepared statement.
Argentina is undergoing a currency devaluation after ending the peso's decade-long peg to the U.S. dollar, and its economic policy is in flux as its fifth president in a month tries to quell unrest.
One proposal would have consumer loans of less than $100,000 paid back at the devalued rate, which would stick FleetBoston with the difference about a 40 percent difference at current exchange rates.
The government has earmarked funds to compensate banks for those losses, "but nobody knows how that's going to work," Mr. Cassidy said. In December, FleetBoston pre-announced earnings of 3 cents per share and charges of 62 cents per share that included a $150 million in write-downs on its Argentine-loan portfolio. Some analysts believe hundreds of millions of dollars more in write-downs could be coming.
"Aside from any additional action the corporation may take due to these developments in Argentina," the company said, it stands by the pre-announcement of earnings of 3 cents per share.
FleetBoston, the country's seventh-largest financial holding company and the parent of Fleet Bank, has been doing business in Argentina for 85 years. The country accounts for only about 3 percent of its earnings, but the crisis there is reverberating through the company.
"There's going to be more bad news," Mr. Cassidy said. "We don't know the severity of it, because we don't know what the final plan is from the Argentinian government."
For that reason, the delay makes sense, said A.G. Edwards & Sons analyst David George.
"Rather than go to the market twice in the next month, they're electing to do it just once," he said.
Another motivation, he added, is piling any bad news into the 2001 earnings reports to clear up balance sheets for 2002.
Mr. George estimates that FleetBoston's total consumer exposure in Argentina is about $2 billion, and about $6 billion overall.
In another sign of Argentina's financial troubles, British Airways said yesterday it would suspend half of its flights to Argentina next month in response to the mounting economic crisis gripping the country.
BA currently flies to Buenos Aires six times a week, but from Feb. 6 it will limit flights to three times weekly, a spokeswoman said.
"It's a temporary measure in response to the economic situation in Argentina," she said. "We'll adjust the schedule when we think it's appropriate."

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