Fleet Financial Group executives have raised by 25% their initial estimates of annual savings from the upcoming merger with National Westminister Bank's U.S. unit.

Jay Sarles, vice chairman of Fleet Financial and chairman of its New York banking unit, said in an interview last week that Fleet hopes to cut at least $250 million in annual operating costs from the combined operation, instead of the originally predicted $200 million.

Mr. Sarles and John Tugwell, chief executive of National Westminster Bancorp, said the bulk of the cost savings will probably come from the processing side.

Fleet and National Westminster are reviewing how to integrate the operations, they said.

"Cost savings will clearly come out of the back office, even if the integration takes some time to achieve," Mr. Sarles said.

Further savings will come from closing some 30 branches, mainly on Long Island.

In all, 1,800 jobs are to be eliminated, partly at Natwest and partly at Fleet.

The cuts would be distributed across the New York metropolitan region but would fall most heavily on Long Island. Half of the reductions would come from attrition, the executives said.

The two banks are scheduled to merge May 1.

Fleet closed another acquisition, with Hartford, Conn.-based Shawmut National Corp., late last year. Mr. Sarles said Fleet doesn't expect to complete its integration with Shawmut until the end of the summer.

He said the integration of Natwest into Fleet will not be mapped out until this fall, and the job won't be finished until June 1997.

The two executives noted that Fleet's acquisition of the Jersey City- based unit provides little overlap and constitutes more of a geographic expansion than an in-market consolidation.

The acquisition will boost Fleet's assets in New Jersey and New York from $2 billion to nearly $20 billion, adding a valuable franchise with some 24,000 small business customers and 6,000 middle-market customers.

One of Fleet's top priorities is to boost Natwest's cash management, and its trust and investment management activities. Natwest has only limited operations in this arena, with some $2.5 billion in assets under management compared to Fleet's $45 billion.

Mr. Sarles said Fleet intends to expand both institutional and individual investment management. The bank also hopes to increase insurance brokerage at Natwest, which already has some 300 brokers in its branches.

As for small business, Mr. Sarles said Fleet will soon introduce its own fast-track approval process for small-business loans of less than $100,000 into Natwest's array of products

Mr. Sarles said the critical test will be whether or not Fleet manages to retain Natwest customers.

"Typically, you expect a number of people to leave but you try to manage it," Mr. Sarles noted. "But so far, we've seen no indication that the rate of people closing accounts is any greater than it has been in the past."

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