The dark days could soon be over for the stocks of banks that trade heavily in derivatives, analysts predicted.
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Although third-quarter trading revenues were nowhere near the record levels of the year before, they were significantly improved from the second quarter, analysts noted.
They were divided on whether revenues might dip again in the fourth quarter, traditionally a slow one for trading. But they said they see a brighter outlook after that.
"In 1995, the clock starts again," said Raphael Soifer, the money-center analyst for Brown Brothers, Harriman & Co. "Derivatives activity should improve again in 1995."
Shares of the banks that rely most heavily on proprietary trading -- namely, Bankers Trust New York Corp. and J.P. Morgan & Co. -- had a tougher time in the market after their recent earnings announcements than did other big traders, said Ronald I. Mandle, banking analyst at Sanford C. Bernstein & Co.
"Both Bankers Trust's and Morgan's trading revenues are down from 12 months and even three months ago," while trading revenues at other banks improved from the second quarter, Mr. Mandle said.
What's more, such business lines as credit cards and retail banking that have provided positive news to lift shares of Citicorp and other big banks were not a factor in Bankers Trust and J.P Morgan's business.
"Others could make up the difference somewhere else," Mr. Mandle said.
Mr. Mandle said the negative publicity surrounding Bankers Trust's derivatives business has hurt its stock, and J.P. Morgan's stock price has been affected by its lackluster trading performance.
Shares of J.P. Morgan and Bankers Trust are "trading closer to their yearly lows than someone like Citibank," he said.
At J.P. Morgan, third-quarter trading revenue was off nearly 40% from the same quarter in 1993, falling to $282 million from $464 million.
Morgan derives nearly 35% of its total revenues from trading activities.
The bank's stock was trading Monday at $62.125 per share, only slightly above its 52-week low of $59.25.
Bankers Trust, which in the third quarter was hit with two lawsuits over its derivatives dealings, saw trading revenues fall to $390 million, from $431 million last year.
The company's trading revenues account for 47% of its total revenues. Bankers Trust's stock was trading at $67.875, not far above its 52-week low of $63.50.
Among other big traders, Citicorp reported third-quarter 1994 trading revenues of $287 million, significantly lower than the $478 million posted in the same quarter a year earlier.
The bank company's stock was testing its 52-week high of $47.125 a share, reaching $47.25 in early afternoon trading Monday.
Chase Manhattan Corp. was the only money-center institution to report an increase in trading profits, compared with last year's third quarter, posting $188 million versus $186 million last year.
Chase's stock was trading at $35.875 Monday.
Analysts noted that 1993 was an exceptional year for trading at most money-center banks so that it is unfair to expect a repeat performance anytime soon.
"'Never' is a long time," Mr. Mandle said. "I don't expect to see numbers like that in the fourth quarter."
"The fourth quarter will be similar or a little better than the third," said Mr. Mandle.
"The fundamental trends will be a little better in the fourth quarter."
