A wariness of exotic derivatives contracts that took hold earlier this year, following big losses by such Bankers Trust New York Corp. clients asProcter & Gamble Co., has put a crimp in in the bank's revenue stream.
NevertheleSs, strong demand for the bank's commodities, currency exchange, and equity derivatives products helped it to keep pace with its trading competitors. And analysts said demand for the high-margin derivatives will soon rebound.
Bankers Trust "maintained its market share under very tough market conditions," Brown Brothers Harriman & Co. analyst Raphael Soifer said. "Boards of directors are reevaluating their positions on the use of derivatives. But its only temporary, they'll come back."
The money center bank, which last year derived a greater proportion of revenue from trading than any of its rivals, reported that second quarter trading revenue was down 54% from the 1993 period, to $245 million.
Still a Big Improvement
As weak as the quarter was, however, it represented a substantial improvement from the first quarter, when Bankers Trust posted $191 million in trading revenue.
The bank also maintained its position as the third-largest trading bank in terms of notional value of contracts, behind Chemical Banking Corp. and Citicorp.
In fact, in terms of revenue, Bankers ranked ahead of the others for the quarter.
Last week, Chemical reported $203 million in second quarter trading revenues, down from $298 million a year ago. Citicorp had revenues of $159 million, down substantially from $572 million in 1993.
Calls It 'Strong Rebound'
"The second quarter trading environment was a tough one," a Bankers Trust spokesman said. "But we've made a strong rebound from generally poor results."
In a teleconference with analysts Friday, Bankers Trust chief financial officer Timothy Yates said revenues from derivative products fell 30% in the second quarte, but, he said, demand is beginning to recover.
Mr. Soifer of Brown Brothers said Bankers Trust's trading revenues - like those of many money-center banks - were down because corporate and institutional investors have been wary of using derivatives.
Since late last year, investors have been gun-shy, particularly after Procter & Gamble reported a $102 million loss because of its derivatives use.
"On the client side," said Mr. Soifer, "commodity, foreign exchange, and equity derivatives have been moving off the shelf." He added that Bankers Trust did well in Asian and Latin American markets.
However, Mr. Soifer added that the weakness in demand for the morre exotic products was highly pronounced.
After the bank's poor performance in the first quarter, Standard & Poor's Corp. downgraded Bankers Trust's bonds. S&P analyst Tanya Azarchs said the latest result did little to change the rating agency's view.
Not Unexpected
"This quarter has continued to be weak, but we look at it as a long-term cycle. We expected the second quarter to be weak," said Ms. Azarchs.
She said, however, that she is expecting a "meaningful recovery" during the second half of the year.
"We're willing to give it another quarter," she said. "The concerns over rising interest rates caused a change in trading. It may be a signal of something longer running. But it's probably just an adjustment to the turn in interest rates."
