BOSTON -- Bank of Boston Corp. said Monday that it would make $3 billion in new business loans available over the next few years in an effort to stimulate the New England economic recovery.
The initiative was announced with great fanfare at a press conference attended by top city and state officials and designed to herald that the region and the bank are turning around.
Bank executives said the new loans -- to be made to businesses of all sizes in all six states -- would represent a doubling of the bank's 1991 lending pace and result in a net increase of 30,000 to 50,000 jobs.
"Bank of Boston is once again ready, willing, and able to do what bankers should do -- lend money" said Ira Stepanian, chairman and chief executive.
No Firm Commitment
Bank executives acknowledged that the announcement was more hype than substance.
The $3 billion -- half of it for Massachusetts -- was described as a projection based on loan demand, rather than a firm commitment to lend.
The loan will not be offered on better terms than are currently available, nor will the bank have to take special steps to raise the funds to make the loans.
But the bankers said that after nearly three years preoccupied with their own earnings problems, their willingness to lend marks a break in the bank's and the region's fortunes.
"The perception in the marketplace has been that banks have not been out lending," Mr. Stepanian said. "We want to change that perception."
Some observers said the announcement could be the first salvo in what may become a spirited competition for loans among the region's top banks.
Competing for Smaller Pie
Although the New England economy and bank profits are finally showing signs of recovery, loan demand is likely to be much smaller than in the 1980s.
The big three bank companies -- Bank of Boston, Fleet Financial Group, and Shawmut National Crop. -- will be competing for a smaller lending pie.
Fleet declined to comment on the Bank of Boston announcemet. Shawmut said it welcomes additional efforts to lend.
Total loans in the region have shrunk by about 30% since the beginning of 1990, according to Federal Reserve data provided by Bank of Boston.
Even though Bank of Boston made $800 million in new loans in New England last year, its regional loan portfolio after pay-offs and writedowns shrank 15%, after a similar decline in 1990, according to Rober Mahoney, head of New England corporate lending.
After accounting for loan pay-offs, he said he hoped the new credit initiative would result in $2 billion in net additions to the company's regional loan portfolio.
That would increase the company's $13 billion in loans and commitments by 15%.
The bank hopes to lend $1.5 billion in Massachusetts, $750 million in Connecticut, and another $750 million in the rest of New England.
Bank of Boston also committed to make 25,000 calls on businesses during the next seven months, and 2,500 on inner-city companies. It also said it would establih a toll-free phone number and hold seminars.