Bankers Trust New York Corp. voted to maintain its $1 regular quarterly dividend Tuesday, although some equity analysts still predict an eventual cut by Frank Newman, the bank's new president and future chief executive.
Several analysts had seen the dividend declaration as an opportunity for Mr. Newman and the bank to establish a lower financial baseline from which to judge future performance as the bank shrinks such business lines as exotic derivatives and builds up others, like custody and securities processing.
Nonetheless, some concerns among analysts remain. Gerard Klauer Mattison analyst George Salem lowered his investment recommendation to a "sell" from a "hold" even before the dividend declaration.
Mr. Salem said there is still a 70% chance that the bank will reduce the common dividend to between $2.40 and $3 at the next board meeting, on March 19.
"Yesterday's maintenance of the dividend is not the end of the story by any means," said Mr. Salem. "It will leave this issue as a cloud hanging over the stock until the earnings snap back or the dividend is brought back into line with earnings."
Mr. Salem said the current dividend was put in place when the bank's earnings were much higher.
"The dividend is a relic of the past. The bank has now kept the dividend even though earnings have shrunk virtually in half," he said.
Mr. Salem cut his earnings estimate for the bank to $5.75 from $6, while the consensus among analysts is close to $7.
Mr. Salem said his ongoing informal survey of Bankers Trust customers found that of 30 Fortune-500-size companies, more than half were planning to scale back their business with the bank, increasing concerns about its earnings.
The bank refutes the survey, with a spokesman suggesting that a primarily domestic sample of 30 clients out of 11,000 clients worldwide is statistically invalid, since a majority of earnings are generated overseas, and among smaller companies.
Indeed, other analysts remained confident that the dividend would remain at its current level, especially in light of the strong negative signal a cut would send to the market.
"I'm not at all surprised that they maintained the dividend," said David Berry, an analyst at Keefe Bruyette & Woods. "I expect them to continue to pay it."
However, Mr. Berry, who rates the stock a "hold," agrees with Mr. Salem that a transition toward a more profitable business after a difficult year will take some time.