FLEET FINANCIAL GROUP Inc. is going public with ambitious profit and expansion goals that are raising expectations of a big merger for the Rhode Island-based superregional.

A combination with a bank of equal size, possibly one outside the Northeast, could occur within the next few years, Terrence Murray, Fleet's chief executive officer, told analysts last week. Within the next several months, he added, Fleet is likely to announce several small acquisitions.

At a farewell dinner for John Flynn, who is retiring as Fleet's chief financial officer this summer, Mr. Murray and other executives also laid out an aggressive profit plan built around a cost-cutting program to be implemented later this year.

By trimming Fleet's efficiency ration to 60% within two years from the high 60s today, Mr. Murray said, the company can boost its return on average assets 30 to 50 basis points from its current level of about 1.0%.

Analysts expect staffing to be cut in a areas such as Fleet's Recoll real estate workout unit and in credit management. Fleet has aggressively sold some $515 million of problem assets in the past few years, reducing nonperforming assets to 3.6% of loans at March 31 from 7% in 1990.

Analysts who attended the dinner said Mr. Murray is intent on diversifying his asset base and is searching for partners outside the Northeast who have strong fee-income businesses. Fleet's $47 million of assets are concentrated primarily in Providence, R.I., Boston, and New York's Long Island.

"Its market for acquisition is Michigan and Maryland," Lehman Brothers analyst Katherine Hensel wrote in a recent report. "A market extension is now the bank's primary strategy, with no preference as to which state."

Ms. Hensel named Cleveland-based National City Corp. and Society Corp. as well as Pennsylvania's Mellon Bank Corp. and CoreStates Financial Corp. as possible merger partners because of their size and strength in fee-based businesses. The banks range from about $25 billion to $31 billion.

"Something west of the Allegheny Mountains would do more for them in terms of diversification than something in the East," agreed John Leonard, and analyst at Solomon Brothers Inc.

Earnings Expectations Remain Intact

Few analysts came away with a revised earnings forecast, saying Fleet's strengths are already reflected in its stock price. The consensus expectation for the company, which earned $280 million in 1992, is close to $475 million for 1993.

However, some analysts categorized the New England company's goals for the next 18 to 24 months as ambitious.

Fleet's far-flung network of branches is expensive to run, and many of its fee-producing businesses have high overhead costs. With the prospects dim for much revenue growth, Fleet's reach may exceed its grasp, some analysts said.

"Given the mix of Fleet's businesses, they've set themselves some challenging goals," said Mr. Leonard.

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