Duff & Phelps Credit Rating Co. reduced the ratings of Bankers Trust New York Corp. and its lead subsidiary, Bankers Trust Co.
Senior debt of the parent company was cut to A from A-plus; subordinated notes, to A-minus from A; preferred stock, to BBB-plus from A-minus; and commercial paper, to D1 from D1-plus.
Duff reduced the long-term obligation rating of Bankers Trust Co. to A- plus from AA-minus and the short-term obligation rating to D1 from D1-plus.
The downgrading reflected the weakening in Bankers Trust's core profitability, which resulted primarily from a decline in the company's client financial risk management business. This area has been associated with certain derivative transactions.
"Trading and positioning results have also been below expectations. Bankers Trust's other core businesses, specifically transaction processing, asset management, and client advisory have been profitable but have not grown enough to offset the substandard performance in risk management and trading," the rating agency said.
Earnings growth in some of these businesses has also slowed or stagnated, resulting in core profitability below historical results and insufficient to maintain the previous ratings.
The recent hirings of Frank Newman as chief executive officer and Richard Daniel as chief financial officer enhance Bankers Trust's senior management team, Duff said, because both men are very well regarded in the industry.