Bank Of New England Head Says Turnaround Won't Be Quick
ALLISON J. PUGH
Feb. 02, 1990
BOSTON (AP) _ The acting chairman of Bank of New England, which is trying to rebound from the $1 billion loss projected for 1989, said Friday the bank probably wouldn't turn a profit this year but should come out ahead in the long run.
''We're in a fix-it mode. We're not going to be as big, but we're going to be better,'' said interim Chairman H. Ridgely Bullock, who was named by the board of directors last week.
Bullock also told a news conference that the bank continues experiencing deposit outflows sparked by the recent disclosure of the extent of its financial problems, and would have to keep borrowing from the federal government to meet the demands of depositors.
Bullock replaced Walter J. Connolly Jr., who was asked to leave in the wake of serious financial problems at the company, which with $29 billion in assets ranks as the nation's 18th largest banking concern.
Bank of New England reported its projected $1 billion annual loss on Jan. 20. Fourth-quarter losses were estimated at $1.2 billion, among the biggest quarterly losses ever reported by a bank of its size.
The company has attributed much of the bank's problem to bad real estate loans issued in the Northeast, which now total more than $2.5 billion. The bank's capital has plunged below $500 million, or less than 2 percent of the institution's total assets.
Bullock said the bank was hit hard by the declines in the real estate market partly because lenders were not cautious enough with developers.
''I think we had drifted away from the real basics of lending,'' Bullock said. ''It's a very tough business and it has to be managed very toughly.''
One of the first tasks for the bank's new management would be to address the hundreds of depositors who have been withdrawing their funds from the bank since it publicly acknowledged the depths of its problems.
Bullock declined to specify how many depositors were leaving the bank. Several municipalities, including the city of Boston and several cities and towns in Massachusetts and Connecticut have withdrawn millions of dollars from the ailing institution, officials said.
Bullock also said the bank expected the outflow to continue, but assured that the bank was safe for depositors.
He confirmed recent reports that the Federal Reserve had lent Bank of New England over $400 million in the week ended Wednesday, a week after it reportedly borrowed up to $475 million.
Bullock said the bank expected to continue seeking loans from the Federal Reserve ''for some time'' as it sought to meet the demands of depositors withdrawing their funds from the bank.
Bullock said the bank was taking several steps to regain its balance, including the sale of more than $450 million worth of leasing assets and its credit card operations for $820 million. The moves were two in a series of sales planned to net the bank $6 billion, he said.
Bullock said he did not expect the bank to make money during the rest of 1990 because of the costs associated with restructuring, management shakeups and the quick pace of selling assets.
Bank officials also were looking into the possibility of selling subsidiaries, including Connecticut Bank and Trust and banks in Maine and Rhode Island. No bids had been received yet, Bullock said.
''We want to make sure if we cut a deal that it is one we are pleased with when we close it six months later,'' Bullock said. ''This is not any fire sale.''
Part of what would put the bank on track would be changing its corporate culture, Bullock said. Such changes would include getting rid of personal perks that have often accompanied banking jobs in the past, he said.
Major changes also have been made in upper-level management, where five top executives, including Connolly, have left since Jan. 27.