Fleet Financial Group is shuttering its 17 mortgage offices in the Midwest and West, saying it wants to concentrate on marketing mortgages through bank branches in its home territory, the Northeast.

The strategy is the first step by a new management team to attack persistent profitability problems. Michael J. Torke, who became president of Fleet Mortgage Group last month, said poor name recognition outside the Northeast made it difficult to generate retail business. The far-flung offices, he added, were "a distraction."

To be sure, Fleet remains a substantial force in mortgage lending. Last year the Boston banking company's mortgage unit, based in Columbia, S.C., originated $22.5 billion of mortgage loans, making it fifth in the field.

And though Fleet plans to sell its retail offices, it will continue to buy loans from a national network of smaller banks, Mr. Torke said. Correspondent lending accounted for $16 billion of last year's origination total.

The plan to sell the offices is the first concrete example of Fleet Mortgage's focus on the bottom line. After a tumultuous year and a lot of drifting, the unit seems to have chosen a strategic direction.

Fleet will lose about $500 million in originations by selling the 17 branches, Mr. Torke said. But the volume generated from these branches accounted for only about 2% of its mortgage production. "We expect the new strategy to more than offset what we're going to lose."

Gerard Cassidy, an analyst with Tucker Anthony in Portland, Maine, estimated that last year Fleet Mortgage earned $60 million to $70 million. He said that was significantly below than the $100 million net income goal that Fleet set early in 1996. Fleet does not break down income for the mortgage division.

The division has also been a revolving door for top management recently; six high-level executives departed last year.

To stop the exodus of talent, Fleet chose Mr. Torke, an 18-year company veteran, as president last month. At the same time, H. Jay Sarles, a vice chairman of the Boston-based parent, was named Fleet Mortgage's chairman.

Mr. Torke said Fleet's new strategy was to coordinate its retail efforts through the Fleet Bank branches throughout eight states in the Northeast.

Analysts said they were expecting the new management team to make some sort of move, since the profitability of Fleet Mortgage hasn't been up to snuff.

Mr. Cassidy said the retreat from retail operations should enable Fleet Mortgage to generate better returns.

"They are focusing their efforts on stronger profitability, reducing branches and costs associated with branches that don't deliver," Mr. Cassidy said.

Mr. Torke conceded that several of the branches being sold were less profitable than some of Fleet Mortgage's other production operations.

The retail environment is "awfully competitive," Mr. Torke said. Combining this with Fleet's lack of name recognition in the Midwest and West made it very difficult for Fleet to compete, he added.

In the Northeast, loan officers from Fleet Mortgage will work in bank branches. Fleet will also step up its advertising to boost retail volume in the bank's core markets.

While making this retail push in the Northeast, Mr. Torke said, Fleet Mortgage is augmenting its telemarketing channels for loan production.

"We need to call our existing customers with a refinance option before one of our competitors does,"he said.

Fleet's decision to pull back on retail production outside of its backyard mirrors the recent moves of several other banks and thrifts, analysts said.

"A lot of commercial banks have found it unprofitable, or less profitable than they would like, to operate retail branches outside their core markets," said Todd Vencil, an analyst with SNL Securities, Charlottesville, Va.

To that end, Bank United of Texas announced last month that it was selling 61 retail branches outside Texas to National City Corp, Cleveland.

Bank United, like Fleet, has said that it would rather concentrate its retail production efforts on markets where it has a significant bank presence.

And in November, Signet Banking Corp., Richmond, Va., sold all of its retail production offices to Accubanc Mortgage.

But Fleet isn't determined to sell to just one company, Mr. Torke said.

"If we find one buyer, that is ideal," he said. "But we would entertain multiple buyers." He added that several prospective acquirers have been contacted.

Mr. Vencil said it was possible for one company to purchase all of the branch offices but just as likely they would be sold piecemeal.

Mr. Torke said Fleet does not plan to lay off any workers from the 17 branches; the buyers would have to decide.

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