Battered by a sharp drop in trading and net interest revenues, Bankers Trust New York Corp. said Thursday its third-quarter net earnings slumped 46%, to $169 million from $310 million a year earlier.
Earnings per common share came in at $1.98 for the third quarter, down from $3.60 and slightly below expectations of around $2 per share.
Return on equity also was cut almost in half to 14.6% from 30.4%.
"A 15% return on equity is not acceptable in the long run," said Raphael Soifer, an analyst with Brown Brothers Harriman. "No one expects them to make 25%, but they have to get back to 20%."
However, Mr. Soifer and other analysts emphasized that last year's third quarter represented an earnings record. when combined trading and net interest revenues climbed to $606 million.
And they pointed out that this year's $390 million in trading and net interest revenues was still up $145 million, or 59%. from the previous quarter.
But areas besides trading also posted setbacks. Revenues from client finance, for example, fell nearly 50% to $19 million from $36 million in the second quarter. Client advisory revenues, mostly from asset management, fell to $18 million, versus $23 million, and client transaction processing declined to $20 million from $26 million.
Allocations to a special contingency fund to cover possible future losses on fund management also increased sharply to $23 million from an average $6 million over several previous quarters. This led to an estimated $25 million loss on pretax income.
"Other lines of business were not better quarter to quarter, and that's a disappointment," said Diane Glossman of Salomon Brothers Inc. "I give them a pass for the quarter. but not a high pass," Mr. Soifer added. "Trading's coming back, but other businesses are limping along."
Quarterly net interest revenues fell 23% from a year ago to $264 million from $342 million, but rose slightly to $943 million from $941 million for the year to date.
Noninterest revenues, which include trading, securities gains, fiduciary and funds management, and fees and commissions, fell 23% to $707 million for the quarter. For the first nine months of 1994. noninterest revenues fell 26% to $1.85 billion.
Analysts said they were not disconcerted by Bankers Trust's poor showing compared with steep improvements in earnings at many other money-center banks. Because of its heavy reliance on movements in capital markets for its earnings, Bankers Trust "is going to have more variability in quarter-to-quarter earnings," Ms. Glossman said.
"There isn't an overwhelming diversification in their business. but they're far more immunized against any downturn in credit quality, and that's a bigger risk than changes in interest rates," Mr. Soifer remarked.
In other earnings news, Milwaukee-based Firstar Corp. posted net income of $55.9 million for the third quarter, a 10% increase, while Chicago-based Hams Bankcorp said net income rose 17% to $29 million.
The $14.3 billion-asset Firstar cited loan growth, firming credit quality, and expense controls in its strong third-quarter results.
Hams, a Chicago-based subsidiary of Bank of Montreal with $14.7 billion in assets, said annualized returns equaled 0.93%, an increase of 5 basis points from a year ago. Alan G. McNally, chief executive officer, credited rising net interest income and a lowered loan-loss provision for the improvement. BANKERS TRUST New York Dollar amounts in millions (except per share) THIRD QUARTER 3Q94 3Q93 Net income ................. $169 $310 Per share .................. 1.98 3.60 ROA ........................ 0.66% 1.38% ROE ........................ 14.64% 30.37% Net interest margin ........ 1.54% 1.80 Net interest income ........ 282 364 Noninterest income.......... 707 929 Noninterest expense ........ 713 789 Loss provision ............. 17 17 Net chargeoffs ............. 28 33 YEAR TO DATE 1994 1993 Net income ................. $514 $791* Per share .................. 5.97 9.14* ROA ........................ 0.66% 1.24%* ROE ........................ 15.11% 26.65%* Net interest margin ........ 1.77% 1.73% Net interest income ........ 1,003 998 Noninterest income ......... 1,849 2,495 Noninterest expense ........ 2,042 2,219 Loss provision.............. 17 70 Net chargeoffs ............. 12 205 BALANCE SHEET 9/30/94 9/30/93 Assets ..................... $107,559 $84,591 Deposits ................... 22,308 22,378 Loans ...................... 12,268 15,207 Reserve/nonp. loans ........ 192% 132% Nonperf. loans/loans ....... 5.6% 7.4% Nonperf. asset/asset ....... 1.0% 2.4% Leverage cap. ratio ........ 5.5% 6.1% Tier 1 cap. ratio .......... 8.1% 8.2% Tier 1+2 cap. ratio ........ 13.3% 14.1% * before cumulative effects Third-Quarter Earnings Roundup Earnings % (millions) changeBank of Boston $124 +202%Bank South Corp. 21 +33Harris Bankcorp 34 +17Firstar Corp. 56 +10Bankers Trust 169 -46
