- The Washington Times - Wednesday, January 30, 2002

From combined dispatches
FleetBoston Financial's profits are disappearing in the black hole of the Argentine financial crisis.
The parent company of Fleet Bank posted a fourth-quarter loss yesterday of $507 million, or 49 cents per share, largely due to a $1.19 billion, or $1.14 per share, Argentina-related write-down. The charge was $538 million more than what the company announced last month.
In the fourth quarter of last year, Fleet had profits of $894 million, or 81 cents per share.
Fleet, the No. 7 bank holding company in the United States, has been doing business in Argentina for about 85 years. The country has been accounting for only about 3 percent of earnings, but the recent crisis has poisoned what was already a weak 2001 for the whole company due to a struggling capital markets business.
Some analysts predict the financial beating will prompt Fleet to exit Argentina as soon as it's prudent.
Fleet is trying to encourage the government to adopt bank-friendly reforms, so the bank can "retain as much of the value of the franchise as they can," said Nancy Bush, an analyst at Ryan, Beck and Co. "And I think from there it's going to be an orderly withdrawal."
Chief Financial Officer Eugene McQuade said the company hasn't pulled out of Argentina because it thinks staying put is the best way to recoup its investment so far. But in the long run it will do whatever is best for shareholders.
"If it turns out it's better to stay, then we do that," he said on a conference call. "If it turns out we optimize our return to you [by getting out], we'd do that as well."
Mr. McQuade said the company has been conservative and its franchise remains strong.
"Obviously we're disappointed in how the year turned out," he said. "However, reports of our demise are a bit premature."
The company said in December it expected fourth-quarter profits of 3 cents per share, but two weeks ago delayed its earnings report to get a handle on its Argentine exposure and further write-downs were expected.
The company announced $650 million in write-downs in December, about $150 million to $200 million related to Argentina. The $538 million in additional write-downs were all related to Argentina.
Mr. McQuade also disclosed during the call that the company has $174 million on the books in loan exposure to bankrupt energy-trader Enron Corp., following a charge of $50 million. The company has also characterized $100 million related to bankrupt retailer Kmart as nonperforming.
Shares of Fleet fell $2.23 to $32.86 yesterday on the New York Stock Exchange.
Argentina is undergoing a currency devaluation after ending the peso's decade-long peg to the U.S. dollar, as it struggles to emerge from a four-year recession.
Consumer loans of less than $100,000 will likely be paid back at the devalued rate, which could stick foreign banks like FleetBoston with the difference about 30 percent at current exchange rates.
"You can't have Argentina under control, it's out of control" said Miss Bush. "It's out of control for everybody."
For 2001, earnings were $931 million, or 83 cents per share, down from $3.9 billion, or $3.52 per share, in 2000. Yearly revenues were $12.8 billion, down from $17.4 billion in 2000.

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