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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

		Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for quarterly period ended June 30, 2002
		Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period ______________ to ______________

Commission File Number 1-6366

FLEETBOSTON FINANCIAL CORPORATION

(617) 434-2200
(Registrant’s telephone number, including area code)

(Former name, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.

YES			NO

The number of shares of common stock of the Registrant outstanding as of July 31, 2002 was 1,047,716,409.

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FLEETBOSTON FINANCIAL CORPORATION
FORM 10-Q FOR QUARTER ENDED JUNE 30, 2002
TABLE OF CONTENTS OF INFORMATION REQUIRED IN REPORT

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PART I. FINANCIAL INFORMATION

FINANCIAL SUMMARY

This discussion and analysis is part of our Quarterly Report on Form 10-Q to the Securities and Exchange Commission, or the “SEC.” This discussion updates our Annual Report on Form 10-K for the year ended December 31, 2001 and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, both of which we previously filed with the SEC. You should read this information together with the financial information contained in the 10-K and the 10-Q. Certain prior period amounts presented in this discussion and analysis have been reclassified to conform to current period classifications.

         Unless otherwise indicated or unless the context requires otherwise, all references in this discussion and analysis to “FleetBoston,” “we,” “us,” “our” or similar references mean FleetBoston Financial Corporation. Headquartered in Boston, Massachusetts, we are a diversified financial services company with approximately $191 billion in assets, and we currently rank as the seventh-largest financial holding company in the United States based on total assets.

         Our key lines of business include Wholesale Banking, which includes commercial finance, corporate banking, commercial banking and small business services; Personal Financial Services, which includes consumer and community banking, wealth management and brokerage; Capital Markets, which includes brokerage market-making and principal investing; and International Banking, principally in Latin America. You can read more about these business lines and their supporting business units in the Line of Business Information section of this discussion and analysis.

         This discussion and analysis contains certain forward-looking statements with respect to our financial condition, results of operations, future performance and business. These statements are based on certain assumptions by management which involve risks and uncertainties. Actual results may differ materially from those contemplated by these statements due to many factors, including, but not limited to:

•		general political and economic conditions, either domestically or internationally;
•		the political, economic and social uncertainties in Argentina;
•		political and economic uncertainties in Brazil, as well as the economic uncertainties in Uruguay;
•		further deterioration in credit quality, including the resultant effect on the levels of our provision for credit losses, nonperforming assets, net charge-offs and reserve for credit losses;
•		continued weakness in global capital markets in general, and the technology and telecommunications industries in particular, and the impact of that weakness on our Principal Investing and other capital markets business lines;
•		legislative or regulatory developments, including changes in laws or regulations concerning taxes, banking, securities, reserve methodologies, deposit insurance, capital requirements and risk-based capital guidelines;
•		changes in accounting rules, policies, practices and procedures with respect to certain proposals under consideration by U.S. legislators and regulatory and self-regulatory bodies; and

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•

legal and regulatory proceedings and related matters with respect to the financial services industry.

         We recorded a loss of $386 million, or $.37 per share, in the second quarter of 2002 compared to net income of $531 million, or $.48 per share, in the second quarter of 2001. For the six months ended June 30, 2002, net income was $349 million, or $.32 per share, compared to $672 million, or $.60 per share, for the prior year period.

         Included in these results was a loss of $280 million from discontinued operations for the second quarter of this year and $281 million for the first six months of 2002, which resulted from a series of strategic decisions announced in April 2002 designed to re-deploy capital to our core businesses and to reduce earnings volatility. These decisions, which we previously discussed in our first quarter 2002 10-Q, included our intent to sell our investment banking subsidiary, Robertson Stephens, our student loan processing subsidiary, AFSA Data Corporation, or “AFSA,” and our fixed income business in Asia. You can obtain more information about these and other strategic decisions in our Current Report on Form 8-K dated April 16, 2002, which we filed with the SEC.

         We completed the sale of AFSA on June 10, 2002, and recorded a related after-tax gain of $173 million. We have actively marketed Robertson Stephens and the Asia fixed income business since April 2002, and as of June 30, 2002, these businesses were held for sale. Accordingly, they are presented in the accompanying consolidated balance sheet at the lesser of carrying value or estimated fair value less costs to sell, including related exit costs. With respect to Robertson Stephens, since we were unable to sell this business as a unit to a third party or reach an agreement for an employee buyout, we announced in July 2002 that we would be winding down the operations of this business unit. Accordingly, we are actively selling the assets of this business, terminating lease and other agreements, and expect to substantially complete these efforts during the third quarter of 2002. We expect to substantially complete the disposal of the Asia fixed income business by early next year.

         The AFSA sale gain, and estimated after-tax losses related to Robertson Stephens and Asia of $421 million and $30 million, respectively, are included in results from discontinued operations in our income statement. This line also includes the operating results of these businesses for the respective periods. We have presented all prior period information on the same basis. For more financial information with respect to these businesses, refer to Note 2 to the consolidated financial statements included in this 10-Q.

         The remainder of this discussion and analysis reflects results from continuing operations, unless otherwise noted. On this basis, for the three months ended June 30, 2002, we incurred a net loss of $106 million, or $.11 per share, compared to net income of $521 million, or $.47 per share, for the three months ended June 30, 2001. In the six-month period, we earned $630 million, or $.59 per share, in 2002 compared to $674 million, or $.60 per share, in the same period a year ago. Lower earnings for the 2002 periods were primarily attributable to the continued economic deterioration in Argentina and additional provisions for domestic credit losses. Prior year results reflected after-tax charges related to the Summit acquisition, the sale of our mortgage banking business, restructurings within our capital markets businesses, investment write-downs and business sale gains. These current and prior year items are discussed in more detail elsewhere in this discussion and analysis.

         Results for both the second quarter and first six months of 2002 continued to be adversely impacted by the slowdown in the U.S. economy that began in the latter half of 2000, particularly revenues from our capital markets and investment services businesses. 2002 results, however, were positively impacted by lower operating expenses from the corporate-wide cost containment program disclosed in previous SEC filings and significantly lower write-downs of investments in our Principal Investing portfolio. In addition, compared to 2001, 2002 earnings benefited by $.06 per share in each of the first and second quarters from the discontinuance of goodwill amortization, in accordance with the new goodwill accounting standard, SFAS No. 142, which we adopted on January 1, 2002. Prior periods were not restated. This standard is more fully discussed in Note 6 to the consolidated financial statements included in this 10-Q.

LINE OF BUSINESS INFORMATION

Our customer-focused organizational structure includes four principal lines of business: Wholesale Banking, Personal Financial Services, Capital Markets, and International Banking. You can obtain additional information about the products and services offered by each line of business in the Line of Business Information section of Management’s Discussion and Analysis included in our 2001 Annual Report on Form 10-K previously filed with the SEC.

         We may periodically restate business line results based on modifications to our management reporting and profitability measurement methodologies and changes in organizational alignment. We have restated the information for the quarter and six months ended June 30, 2001 presented throughout this section to reflect the revised organizational structure implemented in October 2001, as well as management reporting modifications implemented through June 30, 2002. The information appearing throughout this section is presented on both a fully taxable equivalent and a continuing operations basis.

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Line of Business Earnings Summary

The following discussion focuses on the components of each of our four major business lines, and explains results in terms of their underlying businesses.

Wholesale Banking

Wholesale Banking earned $312 million in the second quarter of 2002, a decrease of $44 million from the prior year quarter. Earnings from the underlying business units reflected reduced demand for both loan- and capital markets-related products as the economic environment remained weak. In addition, economic conditions have impacted credit quality, contributing to an increase in nonperforming loans and the provision for credit losses. Higher cash management fees, resulting from higher sales and cross-selling activities, along with the impact of cost saving initiatives implemented in 2001, helped to moderate the negative impact of the weak economic climate.

Commercial Finance earned $120 million in the current year quarter, compared to $149 million in 2001. Higher credit costs were partially offset by increased customer demand for cash management services and growth in the commercial real estate lending unit. Growth in the commercial real estate portfolio was more than offset by declines in certain segments of the asset-based lending portfolio, which we repositioned to reduce credit exposure. Quarterly average balances of lease financing receivables for the second quarters of 2002 and 2001, composed of net investments in direct financing, leveraged and operating leases, were $14.5 billion and $14.7 billion, respectively. Included in the $14.5 billion was $750 million (approximately $75 million our single largest exposure) invested in the domestic commercial airline sector, substantially all of which related to major trunk and commuter airlines. Average aggregate loans and leases were $36.1 billion for the quarter ended June 30, 2002, down from $38.4 billion a year earlier.

         Corporate Banking, which includes several businesses such as traditional corporate banking and debt capital markets, as well as foreign exchange and derivatives, earned $68 million for the quarter, a decrease of 22% compared to 2001. This decline was driven by decreases in loan volumes resulting, in part, from repositioning of the portfolio to reduce credit exposure, and by lower foreign exchange fees due to current market conditions. This decline was partially offset by higher cash management fees. Average loans were $20.9 billion for the second quarter of 2002, compared to

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$24.7 billion for the 2001 period, a decline of $3.8 billion, or 15%.

         As we discussed in our first quarter 2002 10-Q, we announced in April of this year that we intended to reduce our exposure to targeted, non-strategic areas of corporate lending by $10 billion. Thirty percent of this exposure consists of funded loans, with the remainder composed of unfunded, or off-balance sheet, commitments. This reduction effort is progressing, and plans are currently in place to exit or reduce exposures by over $10 billion. We anticipate that this effort, about 75% of which we expect to complete by the end of this year, will result in an improved risk profile.

         Commercial Banking, which is composed of middle market lending, government banking, and global services, earned $66 million in the second quarter of 2002, an increase of $3 million from the prior year. A higher level of cash management fees and lower operating expenses, resulting from cost saving initiatives implemented in 2001, more than offset the impact of reduced loan demand. Quarterly average loan balances decreased $1.9 billion to $14.6 billion, while deposits, particularly within the government banking unit, grew approximately $2.5 billion to $14.5 billion, when compared to the prior year.

         Small Business earned $58 million in the second quarter of 2002, up slightly from the second quarter of 2001. The introduction of new products and continued emphasis on cross-selling, as well as the impact of cost saving initiatives implemented in 2001, offset declining deposit spreads. For 2002, quarterly average loans were $4.1 billion, slightly below the prior year quarterly average of $4.2 billion, while quarterly average deposits were $13.5 billion compared to $12.8 billion.

Personal Financial Services

Personal Financial Services earned $265 million in the current year quarter, consistent with 2001. The group benefited from solid loan growth, particularly in home equity products, strong growth in low-cost core deposits, and effective expense management. These factors combined to offset the impact of lower deposit spreads and a decline in the market value of assets under management. The overall rate of return for this business line was also impacted by goodwill recorded in connection with the 2001 acquisition of Liberty Asset Management, which is currently being integrated into our Columbia Management Group.

Consumer Financial Services, which includes the Consumer Banking & Distribution, Community Investment Group and Credit Card businesses, earned $206 million in the second quarter of 2002, a decrease of just over 1% from the $209 million earned in the same quarter a year ago. This change in earnings resulted from the declining interest rate environment, which drove down loan yields and put pressure on spreads in the deposit-taking businesses, as we continued our customer-focused strategy and did not pass on the full impact of these rate declines to our deposit customers. Partially offsetting the declines was a beneficial change in deposit mix, as low-cost deposit balances in this business unit increased 10%, or $4.3 billion, while higher-cost time deposits decreased $4.1 billion. In addition, expense management and cost savings resulting from the Summit acquisition helped to offset lower revenue levels. Results also benefited from an increase in credit card volumes and an improved mix in the consumer loan portfolio that we achieved through the planned exit from certain less profitable indirect lending portfolios.

         The Wealth Management and Brokerage unit is composed of the Columbia Management Group, the Private Clients Group, and our Quick & Reilly brokerage group. These units, although negatively impacted by weak market conditions, saw their earnings increase 5% to $59 million in the current quarter, compared to $56 million in 2001, as a result of effective expense management. Declines in the market value of assets under management, which reflected the overall lower valuation of the stock market, were offset by additional volume, approximately $48 billion, from the fourth quarter 2001 Liberty acquisition. In addition, average daily trading volumes dropped 21%, and average margin loans decreased approximately $.7 billion from June 30, 2001. The market value of domestic assets under management was $156 billion as of June 30, 2002 (including $48 billion from Liberty) versus $121 billion as of June 30, 2001.

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Capital Markets

Capital Markets includes Fleet Specialist and Principal Investing. These units continued to be affected by adverse market conditions, as more fully discussed below.

Fleet Specialist is one of the largest specialist firms on the NYSE, representing the common and preferred stocks of more than 500 companies and accounting for roughly 19% of the volume on the Big Board. It earned $24 million in 2002, a decrease of $2 million, or 8%, from the second quarter of 2001. The impact of an increase in the average daily trading volume of 9,000 trades per day, or 13%, was offset by lowered profit opportunities and narrowed spreads from difficult market conditions, compared to the second quarter of 2001.

         Principal Investing recorded a net loss of $47 million in the second quarter of 2002, compared to a net loss of $293 million a year ago. These quarterly results were affected by after-tax write-downs of $43 million and $290 million, respectively, taken against this portfolio, reflecting the impairment of value that resulted from the continued weakness in the U.S. economy. At June 30, 2002, the aggregate carrying value of the Principal Investing portfolio was $3.7 billion, a decline of 9% from the second quarter of 2001, due primarily to write-downs. As we discussed in our first quarter 2002 10-Q, we announced our intent in April of this year to reduce the size of this portfolio to approximately $2.5 billion over the next couple of years.

International Banking

International Banking reported a net loss of $475 million in the second quarter of 2002, compared to net income of $123 million in the second quarter of 2001. The vast majority of this decrease was directly related to the political and economic situation in Argentina. Argentina’s net loss for the quarter was $489 million, compared to net income of $46 million in the prior year, and reflects the impact of an additional credit provision and securities charges, as well as dramatic changes in the Argentine government’s monetary and fiscal policies. These government-mandated policies include the pesofication of loans and deposits that had been denominated in U.S. dollars, the abolishment of the fixed currency exchange rate, the elimination of the inflation indexation on many consumer loans, the court-ordered payout of certain frozen deposits, and valuation adjustments on foreign exchange contracts. Brazil reported break-even earnings for the current quarter, which were down $57 million compared to 2001’s levels. Brazil’s results reflected the decision to reposition the balance sheet and reduce risk in that country, which we announced in April 2002. You can read more detailed information about Argentina and Brazil in the Country Risk section of this discussion and analysis.

All Other

All Other includes transactions not allocated to our principal business lines, the residual impact of methodology allocations, such as the provision for credit losses, reserve for credit losses and equity allocations, combined with transfer pricing offsets. For instance, the provision for credit losses is generally allocated to business lines on an “expected loss” basis. Expected loss is an estimate of the average loss rate that individual credit portfolios will experience over an economic cycle, based on our historical loss experience and various market data. This methodology differs from the method used to determine our consolidated provision for credit losses for

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any given period, which is based on an evaluation of the adequacy of the reserve for credit losses considering the risk characteristics in the portfolio at a point in time. The difference between the sum of the provisions for each line of business determined using this methodology and the consolidated provision is included in All Other. You can find more information about our consolidated reserve methodology in the Reserve for Credit Losses section of Management’s Discussion and Analysis in our 2001 10-K.

         The business activities of our Treasury unit are also included in All Other. The Treasury unit is responsible for managing our securities and residential mortgage portfolios, the balance sheet management function and wholesale funding needs.

         Results of All Other can fluctuate with changes affecting the consolidated provision for credit losses, one-time charges, gains and other corporate actions not driven by specific business units. All Other showed a net loss of $185 million in the current quarter, compared to net income of $44 million in 2001. In 2002, All Other included an additional provision for credit losses in the domestic commercial and industrial, or “C&I,” portfolio, partially offset by securities gains. In 2001, All Other included charges related to the Summit acquisition and related integration activity and a loss on the sale of our mortgage banking business. These were partially offset by gains from divestitures.

CONSOLIDATED RESULTS OF OPERATIONS

Net Interest Income

Net interest income decreased $233 million, or 12%, in the quarterly comparison and $404 million, or 11%, in the six-month comparison, primarily the result of a decline in domestic loan volume, increases in domestic and international nonperforming loans, and the impact of Argentine government actions (i.e., allowing the peso to float against the U.S. dollar and converting into pesos certain assets and liabilities that were previously denominated in U.S. dollars) on the level of Argentine assets and liabilities. In addition, net interest income in the 2002 periods was adversely impacted by Argentine government-mandated rule changes subjecting all deposits to inflation-related indexation adjustments. An additional factor contributing to the decline in net interest income was the sale of the mortgage banking business in the second quarter of 2001. These declines were partially offset by an increase in low-cost domestic savings deposits and a decrease in higher-cost wholesale funding.

Net Interest Margin and Interest Rate Spread