Robert B. Hedges Jr. faces some rocky terrain.

As the new managing director of retail banking services at Fleet Financial Group, Mr. Hedges has two missions: meld the cultures of the banks acquired over the last three years, and motivate the 12,000 retail banking employees to increase revenue.

Boston-based Fleet has been struggling to generate momentum in its retail business, stock analysts said.

"They haven't hit their stride yet," said Nancy Bush, an analyst at Brown Brothers Harriman & Co.

Indeed, the $85.5 billion-asset banking company has been reviewing its retail unit for nearly a year, since chairman and chief executive officer Terrence Murray named longtime Fleet banker Robert J. Higgins to the new post of president and chief operating officer.

Mr. Higgins, who has since developed a reputation as a stickler for improving financial performance, has said his goal is to refocus on revenue and shareholder value in the wake of the acquisition of Shawmut National Corp. in 1995 and National Westminster's U.S. retail bank the next year.

Observers said employee morale in the retail bank suffered during the 18-month integration of those two mergers, as executives from each of the three banks competed for roles in the combined organization.

In January, Mr. Higgins gave his marching orders. Leadership of the retail bank, once shared by Mr. Hedges and Anne M. Slattery, would go to Mr. Hedges.

The promotion led to the departure of Ms. Slattery, a senior vice president and a longtime Fleet banker who had been in charge of the branches.

Mr. Hedges, the former head of retail banking at Shawmut, had been working as Fleet's director of alternative delivery channels and products since the merger. His promotion had symbolic importance, analysts said.

"The organization is focused on pursuing growth at a time when most of its customers weren't even depositors two years ago," said Michael Mayo, an analyst at Credit Suisse First Boston. "They may be new customers to Fleet, but they're not new to Bob Hedges."

Observers said Mr. Hedges may also have won the job because his background in electronic delivery made him an unconventional banker who liked to think "out of the box." Ms. Slattery, by comparison, was considered to be more steeped in the ways of traditional banking.

Mr. Hedges downplayed the divisions created by the mergers. "We have a very strong management team in place. It's not so much the cultural issues as laying out our multiyear plan."

But, he said, creativity would be central to reinventing Fleet's retail bank. "We want to understand how consumer behavior is changing. I believe there is significant untapped potential in cross-selling to the existing customer base."

Analysts said Fleet would have to do a better job selling to its customers to boost revenues. "They have not done a great job maximizing their franchise value," said Anthony Polini, an analyst at Advest Inc.

Fleet has a lot going for it in its own market. Its demographic base in New England and New York is generally homogeneous, prone to save, and typically older than that of banks in other parts of the country.

These factors make it easier for Fleet to understand how its customers think and to develop products and services to match, Ms. Bush said.

But the same favorable elements can bring difficulties. New England's slow-growth economy has put pressure on profit margins at the same time banks like Fleet and rival BankBoston Corp. have stepped up their competition for depositors.

Mr. Hedges said Fleet can beat back the competition using techniques more familiar to mutual fund companies: mystery shopping and benchmarking.

"We are constantly thinking about best practices in this region," he said. "We need to have a broader understanding of who the competitors are."

Fleet also has opportunities outside New England, Mr. Hedges and analysts said. Its acquisition in February of Quick & Reilly Group, a New York-based discount brokerage firm, instantly gives it a national network through which to cross-sell banking products, Mr. Hedges said.

Fleet will also arm Mr. Hedges with a data base of customer information that will be accessible from all points of the retail unit. Mr. Hedges said that information would be used to target "high-value" customers in Fleet's most profitable customer segment.

Certain staff members at the branch level have been designated to examine this group of customers and their banking patterns and then create new ways to sell more products to them.

Staff members are also studying Fleet's retail cost structure and how best to eke efficiencies out of the customers who fall short of the high- profit category.

"We can tell which customers have behavior patterns where the costs are greater than the revenues they generate," Mr. Hedges explained. "And we can act on that, decide whether to waive a fee or not, whether to try to cross- sell something."

Later this year Fleet will introduce a new set of retail deposit products based on the research from the data base. Mr. Hedges said the new products would be relationship-oriented and would include pricing features appropriate to how account holders use the bank.

The idea, which has also been implemented in New York by Chase Manhattan Corp. and Citicorp, is to coax customers into more profitable customer segments.

Ultimately, less-profitable customers will pay the fees or choose one of the new accounts to avoid paying them, Mr. Hedges said. "One way or the other, we are better off."

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