Bankers Trust New York Corp. put a new sheen on its turnaround effort by posting a second-quarter earnings increase of 20%.
Advances in securities trading and investment management contributed to its quarterly net income of $181 million, or $2.07 a share.
The per-share figure rose 24% from a year earlier.
Chairman Frank N. Newman issued an optimistic statement about the "solid business momentum" and "exciting opportunities that lie ahead:" specifically, Bankers Trust's merger with the Alex. Brown & Sons investment bank, scheduled for completion Aug. 13.
"They have certainly put their problems behind them," said Morgan Stanley & Co. analyst Arthur P. Soter.
The First Call consensus forecast called for earnings per share of $1.93, 14 cents below the result. Bankers Trust's share price rose Thursday by 56.25 cents, to $94.8125.
Also reporting Thursday, BankBoston Corp. said net income was down 1%, to $212 million, or $1.35 a share.
Factoring out a one-time gain last year, the net was up 13%.
KeyCorp said its earnings rose 3%, to $223 million, or $1.02 a share.
BankBoston equaled the analyst consensus, while KeyCorp was a penny better. BankBoston shares rose 6.25 cents, to $75.3125, and KeyCorp's dropped 6.25 cents, to $56.50.
Bankers Trust
CEO Newman, who joined New York-based Bankers Trust after leaving the Treasury Department in 1995, is making good on his efforts to reduce reliance on the derivatives trading that got the company into trouble in 1994.
"The star is investment banking," said David S. Berry of Keefe, Bruyette & Woods Inc., who like many analysts has revised his Bankers Trust earnings estimate upward for 1997.
"They have shown consistent improvement and broad-based strength in revenues over the last few quarters," Mr. Berry said.
Total revenue jumped 23%, to $1.28 billion. Investment banking revenue rose 26%, to $353 million, and income from the unit grew 9%, to $113 million.
The gains were driven largely by a 28% rise in corporate finance fees, to $174 million.
Trading and sales activities also had a positive effect, the bank said. Revenue benefited from strong arbitrage positions and doubled to $168 million. Income more than tripled, to $59 million from $17 million.
Bankers Trust's risk management unit, where derivatives are housed, made money but is still struggling. Revenues were up 181% to $107 million. Income was $7 million, recovering an $18 million loss but down from $11 million in this year's first quarter.
Investment management revenue rose 16%, to $87 million, and income doubled to $8 million. Assets under management ballooned to $242 billion from $191 billion a year earlier.
Client processing revenues, including those from trust, custody, and related services, gained 6% to $208. But income fell 10% to $18 million, because of costs related to technology and personnel, the bank said.
Along with higher profits came higher expenses: They grew 25% to $1.03 billion. Bankers Trust said salaries were 15% higher as a strong trading quarter pushed commissions higher. The $128.9 billion-asset company also had a 7% increase in its employee base.
KeyCorp
Cleveland-based KeyCorp said gains in venture capital and service fees helped push noninterest income up 9%, to $288 million. Fee businesses were up across the board, the $69.7 billion-asset company added.
Net interest income rose a modest 2% to $707 million, in part because the loan mix has changed over the past two years, more in the direction of higher-earning consumer loans and less in mortgages.
Noninterest expense, an albatross for the past two years, rose by less than 1% to $582 million.
The company said it was on target to meet the goals of a restructuring begun last November, aiming for 2,700 job cuts and 280 branches. It said it had closed 117 branches and sold or agreed to sell another 96.
KeyCorp is also moving toward a one-bank structure organized by lines of business rather than geography-a process due to be completed next month.
"While this restructuring has penalized prior periods' financial performance, we feel well positioned to build market share while many competitors begin a similar process," chairman Robert W. Gillespie said.
But analyst R. Jay Tejera of Dain Bosworth Inc., Minneapolis, contended KeyCorp is actually in catch-up mode. The ratio of operating expenses to revenue, at 57.66%, is high relative to other regional banking companies. But the efficiency indicator was better than the 60.5% of a year earlier.
"Key is in a race to keep its cost structure in line while it tries to build a national business," Mr. Tejera said.
BankBoston
Revenues from BankBoston's capital markets group, from Latin American operations, and commercial loan growth helped fuel earnings momentum, analysts said.
"The numbers show the changing complexion of the bank," said Sally Pope Davis, analyst at Goldman Sachs & Co. "They especially point out the importance of capital markets to the overall business."
Profits and commissions on trading activities within the capital markets group yielded $28 million of income, a 12% gain. Profits on foreign exchange were $20 million, up 66%. Syndication and agent fees from corporate finance activities rose 76%, to $23 million.
Noninterest income slipped 2%, to $377 million. BankBoston attributed the decline to lower profits from mezzanine investments-$55 million versus $77 million in the 1996 quarter-and to the absence of gains on the sale of loans from Ganis Credit Corp., which BankBoston sold earlier this year.
Loans grew from the first quarter at an annualized 12% rate. Like Boston-based rival Fleet Financial Group, BankBoston had stronger growth in its commercial loan portfolio.
"That's a theme we're seeing from a lot of the banks this quarter," said Michael Granger, an analyst at Fox-Pitt Kelton. "We're seeing a real pickup in commercial lending." +++
Mercantile Bancorp. Inc. St. Louis Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $74.6 $78.1 Per share 1.00 1.00 ROA 1.33% 1.48% ROE 16.38% 16.57% Net interest margin 4.30% 4.39% Net interest income 215.6 207.6 Noninterest income 87.9 87.7 Noninterest expense 168.6 162.8 Year to Date 1997 1996 Net income $149.6 $135.2 Per share 1.98 1.72 ROA 1.36% 1.29% ROE 16.00% 14.08% Balance Sheet 6/30/97 6/30/96 Assets $22,580.0 $20,914.0 Deposits 16,954.0 16,696.0 Loans 15,421.0 13,967.0
KeyCorp Cleveland Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $223.0 $217.0 Per share 1.02 0.92 ROA 1.32% 1.35% ROE 18.85% 17.15% Net interest margin 4.69% 4.80% Net interest income 707.0 694.0 Noninterest income 288.0 264.0 Noninterest expense 582.0 579.0 Loss provision 75.0 47.0 Net chargeoffs 65.0 46.0 Year to Date 1997 1996 Net income $435.0 $425.0 Per share 1.98 1.80 ROA 1.31% 1.32% ROE 18.46% 16.78% Net interest margin 4.72% 4.75% Net interest income 1,407.0 1,376.0 Noninterest income 547.0 513.0 Noninterest expense 1,157.0 1,149.0 Loss provision 142.0 91.0 Net chargeoffs 132.0 89.0 Balance Sheet 6/30/97 6/30/96 Assets $69,672.0 $64,764.0 Deposits 44,626.0 44,417.0 Loans 51,644.0 47,928.0 Reserve/nonp. loans 236.56% 266.87% Nonperf. loans/loans 0.72% 0.68% Nonperf. assets/assets 0.62% 0.57% Nonperf. assets/loans + OREO 0.84% 0.77% Leverage cap. ratio 6.67%(a) 6.43% Tier 1 cap. ratio 7.26%(a) 7.60% Tier 1+2 cap. ratio 11.82%(a) 11.72%
(a) estimated
Bankers Trust New York Corp. New York Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $181.0 $151.0 Per share 2.05 1.66 ROA 0.56% 0.52% ROE 15.20% 12.90% Net interest margin 1.29% 1.09% Net interest income 315.0 243.0 Noninterest income 970.0 798.0 Noninterest expense 1,028.0 825.0 Loss provision - - Net chargeoffs 2.0 15.0 Year to Date 1997 1996 Net income $350.0 $289.0 Per share 3.93 3.17 ROA 0.56% 0.50% ROE 14.80% 12.40% Net interest margin 1.31% 1.06% Net interest income 623.0 456.0 Noninterest income 1,838.0 1,548.0 Noninterest expense 1,963.0 1,586.0 Loss provision - 5.0 Net chargeoffs 17.0 25.0 Balance Sheet 6/30/97 6/30/96 Assets $128,948.0 $114,601.0 Deposits 38,430.0 25,293.0 Loans 19,706.0 14,249.0 Reserve/nonp. loans 251% 170% Nonperf. loans/loans 1.50% 4.00% Nonperf. assets/assets 0.40% 0.80% Nonperf. assets/loans + OREO 2.70% 6.60% Leverage cap. ratio 4.40% 5.50% Tier 1 cap. ratio 8.10% 8.30% Tier 1+2 cap. ratio 14.30% 13.50%
BankBoston Corp. Boston Dollar amounts in millions (except per share) Second Quarter 2Q97 2Q96 Net income $212.0 $213.8 Per share 1.35 1.32 ROA 1.33% 1.47% ROE 19.54% 19.68% Net interest margin 4.38% 4.40% Net interest income 615.9 571.5 Noninterest income 376.8 382.9 Noninterest expense 577.9 532.2 Loss provision 60.0 57.1 Net chargeoffs 79.3 48.8 Year to Date 1997 1996 Net income $418.8 $368.7 Per share 2.62 2.24 ROA 1.33% 1.27% ROE 18.79% 16.80% Net interest margin 4.43% 4.40% Net interest income 1,235.9 1,137.0
Noninterest income 706.6 668.1 Noninterest expense 1,122.1 1,059.1 Loss provision 120.0 114.0 Net chargeoffs 158.6 99.9 Balance Sheet 6/30/97 6/30/96 Assets $66,138.0 $62,387.0 Deposits 42,978.0 43,494.0 Loans 42,313.0 40,653.0 Reserve/nonp. loans 240% 225% Nonperf. loans/loans 0.80% 1.00% Nonperf. assets/assets 0.60% 0.70% Nonperf. assets/loans + OREO 0.90% 1.10% Leverage cap. ratio 7.80%(a) 7.80% Tier 1 cap. ratio 8.70%(a) 8.60% Tier 1+2 cap. ratio 12.70%(a) 12.70%
(a) estimated ===
