Cappings a series of strong earnings reports from money-center banks, Bankers Trust New York Corp. on Wednesday reported second-quarter income of $205 million, up 11% from the year-earlier period.
The profit, equal to $2.39 per share, was the second-greatest in the history of the nation's seventh-largest bank company, exceeding analysts' expectations.
Profits were propelled by trading revenues of $335 million - 55% more than the first quarter's $216 million.
The company attributed the results to strong demand from clients for derivative products such as swaps and options, and to proprietary transactions by the bank's nimble traders.
"The traders continue to do wonderful things," said Raphael Soifer, and analyst at Brown Brothers Harriman & Co.
Bankers Trust's results like those of other big New York companies that reported in the last two weeks, exceeded analysts' consensus estimate of about $168 million, according to Zacks Investment Research
Bankers Trusts' shares closed at $61.25 on the New York Stock Exchange on Wednesday afternoon, up 62.5 cents.
The advance came on a day when the Dow Jones industrial average dropped more than 30 points, to 3,277.61.
The bank also reported strong growth in many nontrading areas. Net interest revenue of $241 million was up 13% from the first quarter and 30% from the $186 million posted in the second quarter of 1991.
Income from asset management and private banking activities rose to $180 million, from $162 million in the first quarter and $141 million in the year-earlier period.
The boost reflects an influx of clients in investment management and corporate trust, said Diane Glossman, an analyst at Salomon Brothers Inc.
Fees and commissions of $137 million, which include $69 million of corporate finance fees, rose 10% from the second quarter of 1991 but were off 3.5% from this year's first quarter.
Credit quality appeared to improve slightly as Bankers Trust added $75 million to its loan-loss reserve-up from $55 million in the first quarter - but charged off about $77 million of nonrefinancing-country loans.
The reserve at the end of the quarter equaled 103% of the company's $1.6 million of cash-basis loans.
The chargeoffs included a $50 million loan to a "domestic commercial credit," identified by a source as a Donald Trump holding. The company also wrote off $21 million of real estate loans $7 million of highly leveraged transactions.
Noninterest expenses, as usual during strong trading quarters, rose because of higher accrual for bonuses to traders. Expenses were up 10% from the first quarter and 9% from the year-earlier period, to $589 million.
In a somewhat unusual occurrence at a time when banks are reducing assets to build capital ratios, Bankers Trust's assets soared during the quarter, to $74.7 billion, from $64.6 billion at March 31.
The company attributed the expansion to increases in trading assets and securities bought under resale agreements.
However, analysts speculated that the asset boost reflected a move by Bankers Trust to build up government securities revenues in BT Securities, its Section 20 underwriting subsidiary.
The bank may have been bumping against a regulation limiting revenues from underwriting corporate debt and equity in the securities unit to 10% of the unit's revenues.
Even with the increase in assets, Bankers Trust's capital ratios remained strong. Its June 30 Tier 1 equity capital ratio of 6.75% and its total risk-based capital ratio of 12.2% are well above regulatory minimums.
Stronger Capital Base
The company's lead bank subsidiary also appears to have boosted its mildly deficient capital base during the quarter.
"Preliminary estimates indicate that Bankers Trust Co. met the well-capitalized definition at June 30," a bank spokesman said, referring to a new regulatory definition that determines whether a bank can accept brokered deposits.