Rebounding from recent woes in its risk management business, Bankers Trust New York Corp. posted net third-quarter earnings of $155 million on Thursday - an 8% decline from the year-earlier period, but a 70% improvement over the second quarter.
Separately, Bank of Boston Corp. reported a 13% rise in earnings over the 1994 third quarter, to $140 million.
The quarter-to-quarter gain at Bankers Trust reflected a strong improvement in risk management and merchant banking fees, including equity gains.
"The client risk management business moved back into the black this quarter, representing a major swing from a negative $49 million in the second quarter to a positive $1 million," Salomon Brothers Inc. analyst Diane Glossman noted.
Fully diluted earnings per share came in at $1.71, or well above the $1.52 consensus of analysts' estimates tracked by First Call Corp.
Still, some analysts were disappointed. "At the end of the day, I felt my estimates were too high," said Raphael Soifer of Brown Brothers Harriman & Co. in New York. Mr. Soifer reduced his estimates from $2.70 to $2.10 for 1995 and from $8 to $7 for 1996.
Bankers Trust, which has been battered by lawsuits in the wake of losses on derivatives contracts it sold to several U.S. corporations, also announced that Frank Newman had been named president and would replace Charles S. Sanford Jr. as chief executive on Jan. 1. Mr. Newman, a former deputy secretary of the Treasury, is to become chairman when Mr. Sanford leaves the bank in April. He recently joined Bankers Trust as executive vice chairman.
Mr. Soifer predicted the lawsuits, which have generated an enormous amount of bad publicity for Bankers Trust, would eventually be settled out of court.
Bankers Trust breaks down its earnings into five categories: client financing, advisory, financial risk management, transaction processing and trading and positioning.
By far the largest chunk of the $155 million the bank earned, or some $104 million, came from trading and positioning. Earnings from trading and positioning rose 53% over the same period a year earlier. Of the $104 million, $56 million came from gains on equity investments.
Net earnings from client finance rose 5% to $20 million; earnings from advisory services nearly quadrupled to $15 million; and earnings from the bank's battered financial risk management business fell to $1 million from $68 million a year earlier.
However, analysts hailed earnings from risk management as the first sign the bank was beginning to get out from under the heavy provisioning in the second quarter.
Salomon raised its 1995 earnings estimate by 15 cents to $2.80 a share, while leaving its 1996 estimated unchanged at $6.75.
Bank of Boston benefited from a 10% increase in net interest revenues, to $441 million, and a 23% rise in noninterest revenues, to $249 million. A year-to-year improvement in the bank's operating ratio - or ratio of expenses to revenues - to 56.7% from 60.4% also helped boost net earnings.
The bank said growth in loan-related and other financial service fees has been mainly driven by higher syndication and advisory fees linked to capital market transactions.
Analysts hailed the strong improvement in fee income and noted that Bank of Boston has performed better than expected for several quarters.
"Bank or Boston is one of the more impressive revenue growth stories," said Mary Quinn, a bank analyst with Keefe, Bruyette & Woods Inc. in New York.
Bank of Boston has embarked on a broad drive to expand its retail, middle market, and capital markets business in New England and in Latin America. But it failed in several attempts to merge with other institutions this year. The bank recently reached an agreement to acquire Boston Bancorp.
Charles K. Gifford, president and chief executive, said Bank of Boston planned to continue expanding "via focused investments, strategic acquisitions, and divestitures." +++
Bankers Trust New York Corp. Dollar amounts in millions (except per share) Third Quarter 3Q95 3Q94 Net income $155.0 $169.0 Per share 1.72 1.98 ROA 0.56% 0.66% ROE 13.51% 14.64% Net interest margin 1.04% 1.54% Net interest income 215.0 282.0 Noninterest income 755.0 707.0 Noninterest expense 728.0 713.0 Loss provision 7.0 17.0 Net chargeoffs 218.0 28.0 Year to Date 1995 1994 Net income $89.0 $514.0 Per share 0.66 5.97 ROA 0.11% 0.66% ROE 1.72% 15.11% Net interest margin 1.07% 1.77% Net interest income 643.0 1,003.0 Noninterest income 1,684.0 1,849.0 Noninterest expense 2,140.0 2,042.0 Loss provision 21.0 17.0 Net chargeoffs 241.0 12.0 Balance Sheet 9/30/95 9/30/94 Assets $103,949.0 $107,559.0 Deposits 24,157.0 22,308.0 Loans 12,786.0 12,268.0 Reserve/nonp. loans 137% 192% Nonperf. loans/loans 5.90% 5.60% Nonperf. assets/assets 1.20% 1.00% Nonperf. assets/loans + OREO 9.20% 8.80% Leverage cap. ratio 5.50%* 5.50% Tier 1 cap. ratio 8.00%* 8.20% Tier 1+2 cap. ratio 12.90%* 13.50%
* Preliminary
Bank of Boston Corp. Boston Dollar amounts in millions (except per share) Third Quarter 3Q95 3Q94 Net income $139.9 $124.0 Per share 1.15 1.04 ROA 1.23% 1.12% ROE 17.13% 17.90% Net interest margin 4.39% 4.34% Net interest income 439.4 423.9 Noninterest income 248.6 202.2 Noninterest expense 393.2 378.3 Loss provision 45.0 25.0 Net chargeoffs 39.0 32.0 Year to Date 1995 1994 Net income $398.6 $314.6 Per share 3.27 2.60 ROA 1.21% 0.99% ROE 17.28% 15.44% Net interest margin 4.48% 4.05% Net interest income 1,299.4 1,139.1 Noninterest income 778.0 629.5 Noninterest expense 1,168.5 1,097.3 Loss provision 175.0 95.0 Net chargeoffs 124.0 213.5 Balance Sheet 9/30/95 9/30/94 Assets $46,083.0 $44,294.0 Deposits 30,009.0 30,313.0 Loans 31,691.0 30,881.0 Reserve/nonp. loans 198% 179% Nonperf. loans/loans 1.10% 1.20% Nonperf. assets/assets 0.90% 1.10% Nonperf. assets/loans + OREO NA NA Leverage cap. ratio 7.30%* 6.40% Tier 1 cap. ratio 7.80%* 6.90% Tier 1+2 cap. ratio 12.60%* 11.90%
*Estimated ===
