Trading losses pummeled fourth-quarter earnings at Bankers Trust New York Corp., forcing profits down 64% to $101 million.
Echoing remarks by the heads of other big New York banks, Bankers Trust chairman Charles Sanford said Thursday that results for the year "were affected by persistently difficult market conditions."
Trading revenues in the fourth quarter dropped almost sixfold to $99 million from $636 million a year ago, while net interest revenues fell 39% to $229 million. Total noninterest expenses fell 13% to $709 million, while all other expenses fell 10% to $338 million.
Net earnings for all of 1994 fell 42.5% to $615 million.
The decline in noninterest and trading revenues is the latest in a series of blows to Bankers Trust. The banking company suffered considerable adverse publicity after it was reprimanded and fined by regulators for questionable sales practices by its derivatives unit. Late last year, Bankers Trust faced lawsuits from customers Gibson Greetings Inc. and Procter & Gamble Co. for its sale of derivatives to both companies.
As a result, Bankers Trust said it reclassified as receivables $423 million in leveraged derivative contracts and placed them on a cash, or nonaccrual, basis in its loan account.
Of the $423 million, $72 million has been charged off from loan-loss reserves. About half the remainder is related to transactions with Procter & Gamble, Bankers Trust said.
"It's a weak quarter and below expectations," said Raphael Soifer, a banking analyst with Brown Brothers Harriman & Co. Mr. Soifer had predicted Bankers Trust would earn $1.38 for the quarter, whereas it reported $1.19 in primary earnings per share.
The analyst added that he is reassessing his forecast of $10 per share for all of 1995.
"The issue to me is really one of stretching out the timetable for a recovery," Mr. Soifer said. "Obviously, it's not going to happen overnight."
Mr. Soifer noted that Bankers Trust posted a $24 million rise in corporate finance fees to $132 million for the quarter. +++ Bankers Trust New York New York, NY Dollar amounts in millions (except per share) Fourth Quarter 4Q94 4Q93 Net income $101 279 Per share 1.19 3.26 ROA 0.38% 1.27% ROE 8.64% 25.91% Net interest margin 1.29% 2.07% Net interest income 252 398 Noninterest income 624 869 Noninterest expense 709 816 Loss provision 8 23 Net chargeoffs 85 184 Full Year 1994 1993 Net income $615 1,070 Per share 7.17 12.40 ROA 0.59% 1.25% ROE 13.48% 26.33% Net interest margin 1.64% 1.82% Net interest income 1,255 1,396 Noninterest income 2,473 3,364 Noninterest expense 2,751 3,035 Loss provision 25 93 Net chargeoffs 97 389 Balance Sheet 12/94 12/93 Assets $97,016 $92,082 Deposits 24,939 22,776 Loans 12,593 15,200 Reserve/nonp. loans 126% 136% Nonperf. loans/loans 7.9% 6.4% Nonperf. assets/assets 1.5% 1.5% Leverage cap. ratio 5.3% 6.3% Tier 1 cap. ratio 9.0% 8.5% Tier 1+2 cap. ratio 14.7% 14.5% ===