Fleet Financial to Buy NatWest’s U.S. Arm : Banking: Deal would give Fleet its long-sought expansion into New York.

BOSTON —  Fleet Financial Corp. said Tuesday that it has agreed to buy New Jersey-based NatWest Bank from its parent, Britain’s National Westminster Bank, for $3.26 billion.

The deal, one of the biggest in U.S. banking history, would make Fleet the nation’s 10th-largest bank, with about $90 billion in assets. It would also achieve Fleet’s longtime goal of expanding into the New York banking market, and it comes just days after Fleet completed the $3.45-billion stock acquisition of Hartford, Conn.-based Shawmut National Corp.

“This obviously has been a year of unprecedented merger and acquisition activity, and obviously Fleet has been a major part of that,” Fleet Chief Executive Terrence Murray told analysts and reporters at a New York news conference.

“Clearly, in this industry there is a push to build scale, create efficiencies, expand product lines as well as geography and add new customers,” he said. “And in this transaction, we accomplish all of those things.”

Fleet is locked in a race to dominate the Northeastern banking industry, battling Bank of Boston Corp., which last week agreed to pay $2 billion for BayBanks Inc., another Massachusetts banking company. “It could be pretty powerful,” said analyst George Bicher of Alex. Brown & Sons.

Fleet plans to slash costs by $200 million a year, or 23%, through the acquisition as it eliminates 1,800 jobs. NatWest Securities, with about 300 branches in New York and New Jersey, employs about 9,000 people.

Terms of the deal call for a payment of $2.7 billion, plus an additional “earnout” payment of up to $560 million, Fleet said. It said the arrangement involves annual payments equal to about 50% of its earnings from the NatWest franchise over eight years.

Fleet plans to pay for the acquisition with “internal funding sources,” including selling $31 billion in securities held by Fleet and NatWest--$18 billion in Fleet assets and $13 billion--or roughly a third--of NatWest assets.

The deal is expected to close in the second quarter of 1996. After the acquisition, Fleet said, it expects to have 1,225 branches and 2,000 automated teller machines from Maine to New Jersey.

London-based National Westminster said earlier this year that it wanted to sell the bank. Fleet’s shares rose $2 to $41 on the New York Stock Exchange.