Bankers Trust Corp. stock dipped Thursday as investors worried that it might follow in the footsteps of J.P. Morgan & Co. with bad news about fourth-quarter performance.
"Bankers Trust and J.P. Morgan tend to suffer the same ills at the same time," said Scott Edgar, director of research of the Sife Trust Fund, as Bankers Trust stock dropped 75 cents, to $81.6875, after trading as low as $80.50.
J.P. Morgan said Wednesday that its fourth-quarter earnings would be much lower than analysts' expectations because of proprietary trading and a pretax restructuring charge.
That left market analysts waiting for the other shoe to drop.
Bankers Trust has already said it would take a restructuring charge, and some said it could result in a pre-announcement. Last summer, Bank- America's pre-announcement about trading losses in Russia was followed in short order by similar announcements by several money-center banks.
The final three months of the year often become the kitchen-sink quarter-when corporations take charges and get bad news out of the way. "Banks just want to put 1998 behind them," said Joan T. Goodman of the Pershing Division of Donaldson, Lufkin & Jenrette.
Market analysts said large banks with exposures to turbulent foreign economies are the most liable to issue such warnings, because October was a month of losses for most of them.
Analysts have already been reducing their earnings estimates for capital-markets-oriented banks, noted Lawrence W. Cohn, a bank analyst at Ryan Beck & Co. "In mid-November banks knew where they stood in October, and it was a terrible month."
Portfolio manager James Ellman of the GT Global Financial Services Fund said that if other banks do give early warnings, chances are it will be a result of proprietary trading.
"If some proprietary trading desks bet that the market was going to get worse and it got better, as it has, then some banks are going to get caught with their hindquarters hanging out in the breeze," said Mr. Ellman.
Bankers Trust, which has agreed to be bought by German bank Deutsche Bank AG, is the likeliest to give warning, analysts said. The banking company said it was taking a sizable restructuring charge to reduce annual operating expenses by $300 million, Ms. Goodman said.
"The question is: With Deutsche's offer on the table, will that hinder them from making that announcement?" Ms. Goodman said.
Mr. Ellman, however, said a pre-announcement warning from Bankers Trust and another disappointing quarter is not likely to scare off many investors.
"Once a merger is announced, there is a huge volume of long-term investors who get out of the stock and a huge volume of arbitragers who get in," said the portfolio manager. "Those investors are going to be much more focused on the merger going through then a couple of down quarters."
Analysts said Chase Manhattan Corp. is the least likely to issue a pre- announcement warning, because its earnings took less of a beating in the third quarter than other money-centers and its earnings are less likely to take a beating in the fourth.
Some analysts said Citigroup, which owns Salomon Smith Barney's big trading operation, might be next to disclose problems. Others said BankAmerica Corp., which has taken writeoffs as a result of its relationship with the hedge fund D.E. Shaw, is likely to have continued writeoffs.
