A mega-merger with a hopeful twist (continued)

FLEET TRACES ITS ROOTS to the founding in 1791 of the Providence Bank, which became Industrial National Bank. Beginning in 1982 under former chairman Terrence Murray, a Woonsocket native, the financial institution began an aggressive merger campaign, acquiring Norstar Bankcorp of New York, then the Bank of New England, Shawmut National, and in 1999, BankBoston, making Fleet the nation’s seventh largest bank.

Murray had argued it was necessary for Fleet to grow to ensure that New England had one locally controlled bank — a distinction that ends with the Bank of America deal. The new bank’s top official in Providence is Neil D. Steinberg, president and chief executive officer of Fleet Bank in Rhode Island. Steinberg rejects the characterization of Fleet-the-Unfriendly, saying that this is more envy at the bank’s merger successes than a realistic assessment of its services, sort of the way some people view the New York Yankees: "Very successful, always winning, sold out every game."

"I think there was the sense — and some of that was true — that the focus was on acquisitions," he says. But when all of its business are taken together, the Fleet system was and continues to be a key player in Rhode Island’s economy, Steinberg says: "Our goal is to be the best bank in the neighborhood."

So what will happen?

After the $47 billion purchase was announced last October 27, Bank of America offered a series of assurances: One was that New England employment, while it might cycle up and down during the transition, would remain relatively constant; that since the two banks’ branches didn’t overlap, it wasn’t likely branches would close. During 10 years, Bank of America promised to invest an astounding $750 billion for community development and other beneficial purposes, with $100 billion earmarked for the former Fleet region. (By contrast, Fleet had invested $18.4 million during the past five years.)

Later, bank officials said they would axe about 12,500 jobs nationally — about seven percent of the merged bank’s 180,000 workers — with about a third of those jobs to be absorbed through retirements and ordinary attrition over two years. Just as ominously, the bank said it hoped to save $1.1 billion annually from efficiencies created by the merger, and the Boston Globe later disclosed that the estimate of annual savings had grown to $1.375 billion.

Steinberg, in an interview at Fleet’s Providence offices on Kennedy Plaza, acknowledges that some Rhode Island jobs are being lost. But he said he could not say what the net effect has been so far. "Obviously, with the Bank of America transaction, we are going through a transition, and it’s no secret that that includes some consolidation," he says, referring to job losses. "We don’t have exact numbers to publish, because it’s very, very fluid."

"Fluid" means that not all of the job changes here are layoffs, and that some normal filling of vacancies is continuing. Steinberg says some people are voluntarily asking for relocation to other parts of the Bank of America system, while others are making "lifestyle" changes and deciding to leave on their own. "It was no secret that when this transition was coming together, that in New England, there would be job loss," he adds. "There was also a commitment on the part of Bank of America, in New England, to at some point whenever the transition was done — it could take a couple of years — to maintain the levels that were originally here. So what we will probably see is some consolidation and some build-up back in terms of jobs."

Anticipating this, Fleet and the state worked out a last-minute piece of legislation as the General Assembly was winding up its regular session in June, allowing Fleet and other companies that get tax breaks for creating new jobs to sea-saw on job levels. Under the old system, companies that received reduced corporate income taxes for added jobs would lose their entitlement if job levels dropped. Now, their tax rate will still rise if they reduce job levels, but the firms can apply for rebates if their levels go back up within two years.

Michael McMahon, who heads the state Economic Development Corporation, says the purpose is to encourage Bank of America (and other companies) to add jobs following periods of fluctuating employment.

Whatever the loss of jobs so far, it apparently has not been big enough to trigger a formal notice to the state, as required by the federal Worker Adjustment and Retraining Notification Act (WARN). This has happened in Massachusetts, where officials say at least 500 jobs might be lost.

George Burke, in the dislocated workers division of the state Department of Labor and Training, says no such notice has been issued in Rhode Island. Further, he says, job losses appear to be minimal at this point, and less than the figure — which he would not disclose — indicated by Fleet before the merger was completed. Since the takeover, Bank of America has not indicated what the numbers might be, Burke says. The lack of information is, for now, delaying a request for more than usual federal funds, should they be needed to help laid-off workers with job counseling, resume writing, and other services.

The prospect of "consolidation" leaves many jittery. Leonard Lardaro, a University of Rhode Island economist, says one potentially endangered area is the so-called back office function of the bank — telephone and computer operations centers. (Fleet has employed up to 750 workers at a call center in Lincoln, and runs a technology center in Johnston, with 465 workers, according to figures supplied by the state EDC.) "I think even without the merger, the back office type of things are possibly going to be in jeopardy," Lardaro says, because many companies are out-sourcing or moving such operations to lower-wage countries like India. Indeed, Bank of America itself, after the Fleet deal was announced, said it was setting up a subsidiary in India that could employ 1000 workers by 2005.

Steinberg says there aren’t current plans to shutter the Rhode Island call center, and that Bank of America actually is adding some workers to service a new "premier banking segment," aimed at providing investment and other services to small business owners and "high net worth" individuals. "I can’t tell you a year from now what the decision is going to be, but as far as I know, there are no immediate plans," Steinberg says, adding that in terms of national standards, the Rhode Island operation is "a top-performing call center."

Another potential target could be Fleet’s Quick & Reilly brokerage operations, which employs 240 here. Quick & Reilly is to be merged into the parent company’s brokerage, Banc of America Investment Services. But a spokesman says while no center closing or job decisions have been made, the firm expects "the impact to be extremely minimal," and that both brokerages are "aggressively hiring financial advisors."

CERTAINLY, THE STATE is not waiting idly for decisions to be made at corporate headquarters in Charlotte.

The modification of the job creation-tax credit bill was this year’s rare example of cooperation between the Republican administration of Governor Donald L. Carcieri and the Democratic-controlled General Assembly, and it’s a measure that EDC director McMahon says will provide a "tool" to promote Bank of America’s local growth.

Further, McMahon says that just days after passage of the tax break bill, he met with Steinberg and other Rhode Island-based officials to explore ways in which the state can ward off job loss or even attract new BOA positions. "There are a number of senior Fleet executives who are loyal Rhode Islanders," McMahon says, "and we are relying on them to do initial scouting as to where the opportunities are. We expect in the not-too-distant future — in months — to hop on a plane to Charlotte, and to be making our case directly."

Steinberg characterizes the bank’s discussions with EDC as "preliminary," but he speaks approvingly of McMahon’s economic development team. "I give him a lot of credit, because we now have innovation and creativity in economic development that we haven’t always had, in my opinion, not to knock anybody," Steinberg says. "But these are people who have navigated nationally, thinking beyond the scope of Rhode Island."

It is unclear how much of an assist Rhode Island can expect from the home team. For one thing, one never knows who will remain on the squad. There was a lot of local comfort, for example, at the time the deal was announced since a Rhode Islander, Eugene M. McQuade, was to be president of the enlarged Bank of America.

But McQuade resigned on May 24, shortly after stockholders for the two companies approved the merger, implying that former Bank of America execs were the ones really calling the shots. "It was a great title, but it was not the job for me," McQuade, who will reportedly collect $25 million in separation benefits, told the Providence Journal.

"Yes, admittedly — it was not a secret — it was nice to have a corporate officer here," Steinberg says of McQuade’s departure. "But from doing business on a day-to-day basis, I don’t think it has any negative effect at all."

Even before the signs are changed around Christmas, Fleet customers are already enjoying some merger benefits, Steinberg says. Fleet ATM users can use Bank of America teller machines — there are 16,500 throughout 29 states — without fees. Companies with business in China now can be put in touch with Bank of America specialists in Hong Kong and Shanghai.