A mega-merger with a hopeful twist Although there are no guarantees, Bank of America’s acquisition of Fleet could turn out to be a good thing for Rhode Island BY BRIAN C. JONES

WHEN A MINI-BUS carrying bankers arrived in Providence’s economically ravaged Olneyville neighborhood in late April, Frank Shea wondered what would become of the 22 townhouses planned by his nonprofit housing agency.

FleetBank — the nation’s seventh largest financial institution — was backing the project, on the site of a burned-out mill. But these folks on the bus weren’t familiar Providence faces. They were strangers, from Boston. Bank of America had just purchased Fleet weeks earlier, and Shea wondered whether these new bankers would stick with the townhouse project they’d inherited. But instead of acting like callous, out-of-town meanies, the new officials seemed genuinely interested in the townhouse venture. They even grilled Shea about what the Olneyville Housing Corporation was planning in the future.

It remains to be seen whether Bank of America will indeed pump more money and other resources into Olneyville. But it’s possible, Shea says. And Shea’s hopefulness is shared by others, who wonder if Bank of America will maintain Fleet’s record and even expand its Rhode Island system.

This is not what you’d expect when one big bank is overtaken by another. The standard view is that mega corporate mergers make things worse. The fear is that these deals are only about money, so that hundreds, if not thousands of jobs will be lost, local facilities closed, hometown control diminished, resulting in less competition, higher prices, worse service, and eventually, another merger.

In fact, there is no guarantee that such a scenario won’t happen. Rhode Island has a lot to lose in a restructured Fleet. As the merger was completed on April Fools Day, Fleet had about 4000 employees, 50

branches, and 109 robot ATMs in the state. And with national assets of $196 billion, the Fleet system touched almost all aspects of life in the nation’s smallest state, from handing out mortgages, doling out ATM cash for a dinner date, postponing bill-paying with ever more credit cards, bankrolling commercial deals, and putting its name and money into projects like the downtown Providence Fleet skating center.

Jobs remain a major worry. Some Rhode Island people already have lost their positions or been transferred to Bank of America’s corporate headquarters in Charlotte, North Carolina, and other outposts of BOA’s 29-state empire. One expert familiar with the Rhode Island situation, who asked to not be named, speculates about possible job losses toward the end of the year "that will make your head spin." He concedes he has no figures to back this up.

It’s this lack of information that some local observers find particularly annoying, since there’s less opportunity to head off potentially harmful changes, or at least prepare for them. So far, there don’t seem to be visible changes — even the Fleet name will stay on its buildings and banking forms until December.

While waiting for monster bank to drop one or two oversized shoes on the nation’s smallest state, there is a counter-current of hope that the takeover of Fleet could be beneficial, at least in some respects.

ONE PROBABLE DEVELOPMENT, say some industry experts, could be an adrenaline boost in the state’s overall banking system if Bank of America, with new resources and skills, pushes other institutions to give better service.

"I think, at the end of the day, the customers are going to benefit," says Edward M. Mazze, dean of the College of Business Administration at the University of Rhode Island. Mazze has a unique vantage point to watch Bank of America, because he once was dean of the business school at the University of North Carolina at Charlotte — the same city where Bank of America is headquartered. Further, he’s a director of Washington Trust Bank, a growing South County institution that will compete with the revamped Fleet system.

"All of the other banks are going to have to work harder to keep their customer base," Mazze says, "because Bank of America is going to be able to come in with very, very competitive products, and they are going to be able to do things that smaller banks can’t do."

Another reason that some Rhode Islanders aren’t yet shedding tears is that Fleet provoked a fair amount of resentment during its amazing growth spurt, in which it transformed itself, merger by merger, from just another big bank based in Providence into the country’s seventh largest, with headquarters in Boston. Simply put, some Rhode Islanders felt that Fleet had become too big for its britches.

"I’ve always looked at Fleet as a bank that’s had major, major problems with customer service," Mazze says in a telephone interview. "They grew very rapidly . . . As they grew, they left behind lots of customers, particularly small, medium-sized businesses."

Mazze, who has been in Rhode Island six years, and thus can’t speak about all of Fleet’s recent history, said he’s heard complaints from people who run companies. The business people told the dean that Fleet dropped some of them as customers, because it wouldn’t learn their business dynamics. Another gripe was that Fleet made "unrealistic demands" for collateral and other types of control, prompting businesses to look for other banks. "In many ways, the growth of Washington Trust, and Bank of Rhode Island, and many other banks, tells you, at least on the surface," Mazze says, "there have got to be enough customers out there that were dissatisfied with Fleet and some of the companies that it has acquired to make opportunities available for these other banks to survive."

In fact, despite Fleet’s history as Rhode Island’s dominant bank, it’s actually Number 2. The top spot goes to Citizens Bank of Rhode Island, according to Federal Reserve Bank of Boston figures, which say that in terms of deposits, Citizens has a 40 percent of the Rhode Island market, compared to Fleet’s 24 percent share. Like Fleet, Citizens has grown from strictly Rhode Island roots into a multi-state operation through a series of mergers.

Although now owned by Royal Bank of Scotland, Citizens has its US headquarters in Providence, and has cultivated a hometown image. Not only does Citizens lead Fleet in deposits, it has more employees — nearly 5000, compared to Fleet’s nearly 4000. It has more branches (78), compared to Fleet’s 50; and more ATMs (143) to Fleet’s 109.

Says Mazze: "If you look at the Rhode Island scene — a state with a million [in] population, with less than a handful of significant-sized corporations, a state that can be best classified as the home of small and medium-sized business — there has to be a reason why these other banks have survived and even grown."