Fleet Financial Group Inc. officials threw cold water on merger speculation on Friday, after it was disclosed that the Providence, R.I., bank holding company had secretly acquired stakes in more than a dozen Northeastern banks and thrifts.
Fleet last year received permission from the Securities and Exchange Commission to report its positions in those banks on a confidential basis, rather than in a more traditional public filing, invoking a little-known provision in securities law.
Fleet's positions became known Friday after Bloomberg Business News obtained commission documents under the Freedom of Information Act.
Shares in one of the banks, Summit Bancorp. in New Jersey, jumped in heavy trading that analysts said was partially in reaction to the news. Shares in the other presumed targets were caught in the downdraft of a falling stock market.
Fleet declined to discuss acquisition plans, but emphatically denied that the use of the confidential filing method signaled a secret agenda.
"Portfolios of this nature are not at all uncommon," a spokeswoman said. "Our experience has been that other companies of our size, both banks and nonbanks, hold similar types of portfolios. Exercising the confidentiality option. available we believe to be standard practice."
According to an SEC spokesman, under section 13F, institutional investors with a portfolio over $100 million can request permission to use the confidential filing method. Fleet's request was granted because the commission felt that Fleet's competitive position would be compromised if other potential acquirers knew of its holdings.
The commission documents show that Fleet held a combined $122.3 million investment in 14 Northeast banks as of the first quarter of 1993. The banks are: Amoskeag Bankshares, BayBanks Inc., First Fidelity Bancorp., NESB Corp., First Bankers Trustshares, Edgemark Financial Corp., UST Corp., Vermont Financial Services, Summit Bancorp., Banknorth Group Inc., Chittenden Corp., Washington Trust Bancorp., Multibank Financial, and Shawmut National Corp. It is not known if Fleet still holds the positions in the banks.
"With interstate banking, everyone will be jockeying for position," said Elizabeth Summers, an analyst with New Jersey-based Ryan, Beck & Co. "But Fleet clearly would prefer not to have its name all over the place."
Ms. Summers explained that Fleet probably invoked the confidentiality clause because as a potential acquirer, it did not want its competition getting wind of its intentions, possibly driving up the stock price of the target banks.
"[The shares of] smaller banks already have takeover premiums in them," she said. "If you are an acquirer you naturally would like to get the lowest price. You don't want the stock price driven up when you are about to make your move."
Ms. Summers also said that the fact that Fleet took positions in these banks may not necessarily mean they were on Fleet's menu.
Indeed, shortly after Fleet took its positions in Multibank Financial, Edgemark and NESB, they were acquired by other institutions.
Bank of Boston announced its acquisition of Multibank in September 1992. Edgemark was acquired by Old Kent Financial Corp. last May.
Nor does the acquisition of shares necessarily represent recent activity. Fleet's investment in First Bankers Trustshares dates back to 1989.
"Some banks invest in others for investment purposes only," Ms. Summers said. "Investors are buying up the shares of banks likely to be acquired. They are ignoring the acquirer banks."
Brown Brothers Hamman & Co. analyst Nancy Bush agreed, saying it is not surprising that Fleet has a position in numerous smaller banks.
"They have had these positions for years," she said. "These positions are just good investments for them."
Ms. Bush also said that none of the banks on the list were particularly surprising, with the exception of Baybanks.
"Some of the names were interesting," she said. "Particularly Baybanks, which I don't think they could take over given the difference in their multiples. And some they wouldn't want to take over, like Chittenden and Vermont."
