Bankers Trust New York Corp. reported a 50% plunge in second-quarter earnings, renewing questions about whether the seventh-largest U.S. bank will ever regain its former prowess.
Reflecting declines in both net interest income and trading revenue, earnings fell to $91 million, or 98 cents a share. Analysts had been expecting $1.17 a share.
The report followed a string of highly publicized setbacks, including big losses in the derivatives business, lawsuits by corporate customers, and high-level executive defections.
"There's still a healthy amount of debate as to whether the franchise value measured by normal earnings powers has been permanently impaired," said Frank de Santis, a banking analyst with Donaldson, Lufkin & Jenrette.
"We'll have to wait and see, but I think there is somewhat of a risk here that enough people have left that the earnings power of the corporation isn't what it used to be."
Elsewhere, PNC Bank Corp. reported a 27% decline in earnings for the quarter, reflecting a sharp drop in net interest income. And Bank of Boston Corp. reported a 41% surge in earnings, thanks to rising lending margins in Argentina and Brazil and higher loan volumes in the United States and Latin America.
Bankers Trust did much better in the second quarter than the first, when it lost $157 million. But analysts were nonetheless concerned.
"Vastly superior relative to the first quarter, but still insufficient," remarked Diane Glossman, a bank analyst with Salomon Brothers Inc. in New York.
Total trading revenues fell 44.4% to $136 million, while net interest revenues declined 28% to $222 million. Fees and commissions increased 8% to $211 million, while fiduciary and funds management revenues fell 11% to $166 million.
The performance renewed speculation about whether Bankers Trust will remain independent for long.
"Can they remain independent? Yes," said Ms. Glossman. "But at this point, with the environment changing as quickly as it has been changing, here and overseas, one can't rule out the potential they may join forces with another company."
Meanwhile, the company's executive roster is changing rapidly. Charles Sanford, chairman, and Timothy Yates, chief financial officer, are both planning to leave next summer. And Neil Allen, head of emerging markets, and Ignacio Sosa, senior emerging markets trader, both departed this year.
"They've lost some people, and this is a people business," said Lawrence Vitale, a bank analyst with Bear Stearns & Co. "How much it hurts them remains to be seen."
Analysts said the results released Thursday gave them little reason to change their forecasts for the coming quarters.
"Third and fourth quarters will probably be better, but they won't be all that great," said Brown Brothers Harriman Inc. analyst Raphael Soifer. Mr. Soifer added that he was leaving his estimated earnings of $2.70 per share for the year unchanged.
At Pittsburgh-based PNC, second-quarter earnings fell to $137 million, or 59 cents a share, from 79 cents a year earlier. Net interest income fell to $370.6 million from $501.4 million a year earlier. Results came in broadly in line with analyst expectations.
Bank of Boston, whose earnings hit $133.3 million, "had an excellent quarter with good progress on both the earnings front and in asset quality," said Mary Quinn, an analyst at Keefe, Bruyette & Woods.
The bank, with one of the largest overseas networks among U.S. banks and a large franchise in Argentina and Brazil, is seeking to build it's New England retail and middle-market banking operations and leverage it's international network to expand trade finance-related operations. +++ Bank of Boston Corp. Boston Dollar amounts in millions (except per share) Second Quarter 2Q95 2Q94 Net income $133.3 $94.5 Per share 1.10 0.77 ROA 1.21% 0.89% ROE 17.22% 13.87% Net interest margin 4.49% 3.98% Net interest income 434.1 374.5 Noninterest income 236.1 192.3 Noninterest expense 392.1 372.4 Loss provision 40.0 25.0 Net chargeoffs 43.6 30.0 Year to Date 1995 1994 Net income $258.7 $190.6 Per share 2.14 1.56 ROA 1.20% 0.92% ROE 17.35% 14.15% Net interest margin 4.52% 3.89% Net interest income 860.0 715.2 Noninterest income 529.4 427.4 Noninterest expense 775.3 719.1 Loss provision 130.0 70.0 Net chargeoffs 85.6 62.1 Balance Sheet 6/30/95 6/30/94 Assets $45,254.4 $43,436.6 Deposits 29,120.4 29,395.2 Loans 31,388.3 29,966.1 Reserve/nonp. loans 204% 151% Nonperf. loans/loans 1.1% 1.5% Nonperf. assets/assets 1.3% 1.7% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio* 7.3% 6.6% Tier 1 cap. ratio* 7.7% 7.1% Tier 1+2 cap. ratio* 13.0% 12.3% *estimated Bankers Trust New York Dollar amounts in millions (except per share) Second Quarter 2Q95 2Q94 Net income $91.0 $181.0 Per share 0.98 2.09 ROA 0.33% 0.71% ROE 7.84% 16.87% Net interest margin 1.14% 1.79% Net interest income 231.0 330.0 Noninterest income 587.0 637.0 Noninterest expense 678.0 688.0 Loss provision NA NA Net chargeoffs 2.0 5.0 Year to Date 1995 1994 Net income $(66.0) $345.0 Per share (1.10) 3.99 ROA NA 0.66% ROE NA 15.36% Net interest margin 1.08% 1.87% Net interest income 428.0 721.0 Noninterest income 929.0 1,142.0 Noninterest expense 1,412.0 1,329.0 Loss provision 14.0 NA Net chargeoffs 23.0 (16.0) Balance Sheet 6/30/95 6/30/94 Assets $102,937.0 $103,639.0 Deposits 22,605.0 20,462.0 Loans 11,537.0 13,223.0 Reserve/nonp. loans 134% 180% Nonperf. loans/loans 8.0% 5.6% Nonperf. assets/assets 1.3% 1.1% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio 5.5% 6.0% Tier 1 cap. ratio 8.7% 8.4% Tier 1+2 cap. ratio 14.0% 13.8% ===