<PAGE>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-5920
BANKERS TRUST NEW YORK CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-6180473
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
280 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)
(212) 250-2500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of July 31, 1994: Common Stock, $1 par value,
78,965,275 shares.<PAGE>
<PAGE> 1
BANKERS TRUST NEW YORK CORPORATION
JUNE 30, 1994 FORM 10-Q
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income
Three Months Ended June 30, 1994 and 1993 2
Six Months Ended June 30, 1994 and 1993 3
Consolidated Balance Sheet
At June 30, 1994 and December 31, 1993 4
Consolidated Statement of Changes in Stockholders'
Equity
Six Months Ended June 30, 1994 and 1993 5
Consolidated Statement of Cash Flows
Six Months Ended June 30, 1994 and 1993 6
Consolidated Schedule of Net Interest Revenue
Three Months and Six Months Ended
June 30, 1994 and 1993 7
In the opinion of management, all material adjustments
necessary for a fair presentation of the financial position
and results of operations for the interim periods presented
have been made. All such adjustments were of a normal
recurring nature, except for the cumulative effects of
accounting changes for postretirement and postemployment
benefits (recorded in the first quarter of 1993). The
results of operations for the three months and six months
ended June 30, 1994 are not necessarily indicative of the
results of operations for the full year or any other
interim period.
The financial statements included in this Form 10-Q
should be read with reference to the Corporation's 1993
Annual Report as supplemented by the first quarter 1994
Form 10-Q.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 5. Other Information 31
Item 6. Exhibits and Reports on Form 8-K 31
SIGNATURE 32
<PAGE>
<PAGE> 2
PART I. FINANCIAL INFORMATION
<TABLE>
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data)
(unaudited)
<CAPTION>
Increase
THREE MONTHS ENDED JUNE 30, 1994 1993 (Decrease)
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $1,255 $1,067 $ 188
Interest expense 946 768 178
Net interest revenue 309 299 10
Provision for credit losses - 23 (23)
Net interest revenue after provision
for credit losses 309 276 33
NONINTEREST REVENUE
Trading 124 405 (281)
Fiduciary and funds management 187 176 11
Fees and commissions 195 173 22
Securities available for sale gains 19 - 19
Investment securities gains - 8 (8)
Other 112 70 42
Total noninterest revenue 637 832 (195)
NONINTEREST EXPENSES
Salaries 189 167 22
Incentive compensation and employee benefits 202 313 (111)
Occupancy, net 38 39 (1)
Furniture and equipment 37 34 3
Other 222 196 26
Total noninterest expenses 688 749 (61)
Income before income taxes 258 359 (101)
Income taxes 77 108 (31)
NET INCOME $ 181 $ 251 $ (70)
NET INCOME APPLICABLE TO COMMON STOCK $ 172 $ 246 $ (74)
EARNINGS PER COMMON SHARE:
PRIMARY $2.09 $2.90 $(.81)
FULLY DILUTED $2.09 $2.90 $(.81)
Cash dividends declared per common share $.90 $.78 $.12
</TABLE>
<PAGE>
<PAGE> 3
<TABLE>
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data)
(unaudited)
<CAPTION>
Increase
SIX MONTHS ENDED JUNE 30, 1994 1993 (Decrease)
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $2,466 $2,088 $ 378
Interest expense 1,787 1,489 298
Net interest revenue 679 599 80
Provision for credit losses - 53 (53)
Net interest revenue after provision
for credit losses 679 546 133
NONINTEREST REVENUE
Trading 138 751 (613)
Fiduciary and funds management 375 335 40
Fees and commissions 377 320 57
Securities available for sale gains 23 - 23
Investment securities gains - 12 (12)
Other 229 148 81
Total noninterest revenue 1,142 1,566 (424)
NONINTEREST EXPENSES
Salaries 366 332 34
Incentive compensation and employee benefits 364 584 (220)
Occupancy, net 75 74 1
Furniture and equipment 76 68 8
Other 448 372 76
Total noninterest expenses 1,329 1,430 (101)
Income before income taxes and
cumulative effects of accounting changes 492 682 (190)
Income taxes 147 201 (54)
INCOME BEFORE CUMULATIVE EFFECTS OF
ACCOUNTING CHANGES 345 481 (136)
Cumulative effects of accounting changes - (75) 75
NET INCOME $ 345 $ 406 $ (61)
NET INCOME APPLICABLE TO COMMON STOCK $ 331 $ 394 $ (63)
PRIMARY EARNINGS PER COMMON SHARE:
Income before cumulative effects of
accounting changes $3.99 $5.54 $(1.55)
Cumulative effects of accounting changes - (.89) .89
Net income $3.99 $4.65 $ (.66)
FULLY DILUTED EARNINGS PER COMMON SHARE:
Income before cumulative effects of
accounting changes $3.99 $5.53 $(1.54)
Cumulative effects of accounting changes - (.89) .89
Net income $3.99 $4.64 $ (.65)
Cash dividends declared per common share $1.80 $1.56 $.24
</TABLE>
<PAGE>
<PAGE> 4
<TABLE>
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in millions, except par value)
(unaudited)
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,662 $ 1,750
Interest-bearing deposits with banks 1,579 1,638
Federal funds sold 1,574 361
Securities purchased under resale agreements 12,257 9,567
Securities borrowed 5,396 2,937
Trading assets 54,669 48,276
Securities available for sale 6,961 7,073
Loans 13,223 15,200
Allowance for credit losses (1,340) (1,324)
Premises and equipment, net 763 719
Due from customers on acceptances 401 455
Accounts receivable and accrued interest 2,367 2,561
Other assets 3,127 2,869
Total $103,639 $92,082
LIABILITIES
Deposits
Noninterest-bearing
In domestic offices $ 3,080 $ 3,185
In foreign offices 612 707
Interest-bearing
In domestic offices 5,671 7,120
In foreign offices 11,099 11,764
Total deposits 20,462 22,776
Trading liabilities 25,151 9,349
Securities sold under repurchase agreements 21,509 23,834
Other short-term borrowings 19,188 18,992
Acceptances outstanding 402 455
Accounts payable and accrued expenses 3,656 3,771
Other liabilities 2,646 2,524
Long-term debt 5,582 5,597
Total liabilities 98,596 87,298
PREFERRED STOCK OF SUBSIDIARY 250 250
STOCKHOLDERS' EQUITY
Preferred stock 450 250
Common stock, $1 par value
Authorized, 300,000,000 shares
Issued, 83,678,973 shares 84 84
Capital surplus 1,319 1,321
Retained earnings 3,404 3,226
Common stock in treasury, at cost:
1994, 4,714,603 shares;
1993, 3,076,439 shares (358) (233)
Other (106) (114)
Total stockholders' equity 4,793 4,534
Total $103,639 $92,082
</TABLE>
<PAGE>
<PAGE> 5
<TABLE>
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in millions)
(unaudited)
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1994 1993
<S> <C> <C>
PREFERRED STOCK
Balance, January 1 $ 250 $ 500
Issuance of Adjustable Rate Cumulative Preferred Stock,
Series Q 200 -
Redemption of Money Market Cumulative Preferred Stock,
Series E, F, G and H - (250)
Balance, June 30 450 250
COMMON STOCK
Balance, January 1 and June 30 84 84
CAPITAL SURPLUS
Balance, January 1 1,321 1,306
Preferred stock issuance costs (4) -
Common stock distributed under employee
benefit plans 2 7
Balance, June 30 1,319 1,313
RETAINED EARNINGS
Balance, January 1 3,226 2,552
Net income 345 406
Cash dividends declared
Preferred stock (13) (12)
Common stock (143) (129)
Treasury stock distributed under employee benefit plans (11) (16)
Balance, June 30 3,404 2,801
COMMON STOCK IN TREASURY, AT COST
Balance, January 1 (233) (52)
Purchases of stock (156) (106)
Restricted stock granted, net 6 2
Treasury stock distributed under employee benefit plans 25 59
Balance, June 30 (358) (97)
COMMON STOCK ISSUABLE - STOCK AWARDS
Balance, January 1 143 53
Deferred stock awards granted, net 35 60
Deferred stock distributed - (1)
Balance, June 30 178 112
DEFERRED COMPENSATION - STOCK AWARDS
Balance, January 1 (47) (54)
Deferred stock awards granted, net (36) (60)
Restricted stock granted, net (5) (2)
Amortization of deferred compensation, net 31 44
Balance, June 30 (57) (72)
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, January 1 (319) (288)
Translation adjustments (46) (15)
Income taxes applicable to translation adjustments 42 (7)
Balance, June 30 (323) (310)
SECURITIES VALUATION ALLOWANCE
Balance, January 1 109 20
Change in unrealized net gains, after applicable
income taxes and minority interest (13) (15)
Balance, June 30 96 5
TOTAL STOCKHOLDERS' EQUITY, JUNE 30 $4,793 $4,086
</TABLE>
<PAGE>
<PAGE> 6
<TABLE>
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 345 $ 406
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Cumulative effects of accounting changes - 75
Provision for credit losses - 53
Provision for policyholder benefits 107 73
Deferred income taxes (74) (23)
Depreciation and amortization of premises
and equipment 60 50
Other, net (69) 32
Earnings adjusted for noncash charges and credits 369 666
Net change in:
Trading assets (5,615) (10,070)
Trading liabilities 15,577 1,499
Receivables and payables from securities
transactions (330) 1,571
Other operating assets and liabilities, net 401 425
Securities available for sale gains (23) -
Investment securities gains - (12)
Net cash provided by (used in) operating activities 10,379 (5,921)
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits with banks 32 836
Federal funds sold (1,212) 438
Securities purchased under resale agreements (2,683) (1,841)
Securities borrowed (2,459) (551)
Loans 1,892 916
Securities available for sale:
Purchases (3,352) -
Maturities and other redemptions 1,723 -
Sales 1,307 -
Investment securities:
Purchases - (5,403)
Maturities and other redemptions - 3,890
Sales - 315
Acquisitions of premises and equipment (100) (89)
Other, net 4 (5)
Net cash used in investing activities (4,848) (1,494)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in:
Deposits (2,821) (478)
Securities sold under repurchase agreements (2,378) 7,611
Other short-term borrowings 670 281
Issuances of long-term debt 916 790
Repayments of long-term debt (958) (407)
Issuance of preferred stock of subsidiary - 247
Issuance of preferred stock 196 -
Redemption of preferred stock - (250)
Purchases of treasury stock (156) (106)
Cash dividends paid (157) (142)
Other, net 17 125
Net cash provided by (used in) financing activities (4,671) 7,671
Net effect of exchange rate changes on cash 52 16
NET INCREASE IN CASH AND DUE FROM BANKS 912 272
Cash and due from banks, beginning of year 1,750 1,384
Cash and due from banks, end of period $ 2,662 $ 1,656
Interest paid $1,756 $1,494
Income taxes paid, net $156 $98
Noncash investing activities $120 $95
Noncash financing activities $6 $-
</TABLE>
<PAGE>
<PAGE> 7
<TABLE>
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF NET INTEREST REVENUE
(in millions)
(unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
INTEREST REVENUE
Interest-bearing deposits
with banks $ 24 $ 61 $ 58 $ 116
Federal funds sold 4 4 6 9
Securities purchased under
resale agreements 108 112 204 209
Securities borrowed 43 45 73 81
Trading assets 761 538 1,521 1,043
Securities available for sale
Taxable 64 - 125 -
Exempt from federal income taxes 22 - 43 -
Investment securities
Taxable - 84 - 168
Exempt from federal income taxes - 17 - 31
Loans 229 206 436 431
Total interest revenue 1,255 1,067 2,466 2,088
INTEREST EXPENSE
Deposits
In domestic offices 62 54 107 108
In foreign offices 149 192 302 388
Trading liabilities 237 87 433 171
Securities sold under repurchase
agreements 234 239 448 427
Other short-term borrowings 204 137 378 279
Long-term debt 60 59 119 116
Total interest expense 946 768 1,787 1,489
NET INTEREST REVENUE $ 309 $ 299 $ 679 $ 599
</TABLE>
<PAGE>
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Bankers Trust New York Corporation (the "Parent Company") and
subsidiaries (collectively, the "Corporation", or the "Firm") earned $181
million for the quarter ended June 30, 1994, or $2.09 primary earnings per
share. In the second quarter of 1993, the Corporation earned $251 million,
or $2.90 primary earnings per share.
For the first six months of 1994, net income was $345 million, or
$3.99 primary earnings per share. For the six months ended June 30, 1993,
income before cumulative effects of accounting changes was $481 million, or
$5.54 primary earnings per share.
On January 1, 1994, the Corporation adopted FASB Interpretation No.
39, "Offsetting of Amounts Related to Certain Contracts." The
Interpretation requires that unrealized gains and losses on swaps,
forwards, options and similar contracts be recognized as assets and
liabilities, except where such gains and losses arise from contracts
covered by qualifying master netting agreements. It was the Corporation's
former policy to record such unrealized gains and losses on a net basis on
the balance sheet. As the result of this adoption, at June 30, 1994 the
Corporation's consolidated total assets and total liabilities each
increased by approximately $14 billion. Effective January 1, 1993, the
Corporation adopted Statements of Financial Accounting Standards ("SFAS")
for postretirement benefits other than pensions (SFAS 106) and
postemployment benefits (SFAS 112). In adopting SFAS 106 and SFAS 112 the
Corporation recorded charges to earnings of $100 million and $7 million,
respectively, (or $70 million and $5 million, respectively, net of income
taxes) in the first quarter of 1993 for the cumulative effects of these
changes in accounting principles.
BUSINESS FUNCTIONS ANALYSIS
Because the Corporation's business is complex in nature and its
operations are highly integrated, it is impractical to segregate the
respective contributions of the business functions with precision. For
example, the Client Advisory function is difficult to split from the Client
Finance function, since most complex financings include both an element of
advice and the arrangement of credit for the client. Further, transactions
undertaken for purposes of Client Financial Risk Management may contain an
element of Client Finance or Trading and Positioning. Finally, the Trading
and Positioning function serves as an element of support for client-based
activities. As a result, estimates and subjective judgments have been made
to apportion revenue and expenses among the business functions. In
addition, certain revenue and expenses have been excluded from the business
functions because, in the opinion of management, they could not be
reasonably allocated or because their attribution to a particular function
would be distortive.
The following table breaks down earnings on the basis of the
Corporation's five business functions, which represent its core business
activities and are an important tool for analyzing the results of
operations. Detailed definitions of these categories, as well as a
discussion of the methodology used to calculate their results, appear in
the 1993 Annual Report on Form 10-K.
<PAGE>
<PAGE> 9
<TABLE>
Business Functions Profitability
(Income Before Cumulative Effects of Accounting Changes - in millions)
<CAPTION>
Second First
Qtr. Qtr. Increase Six Months Increase
1994 1994(Decrease) 1994 1993 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Client Finance $ 36 $ 43 $ (7) $ 79 $ 30 $ 49
Client Advisory 23 30 (7) 53 37 16
Client Financial Risk
Management 50 114 (64) 164 161 3
Client Transaction
Processing 26 32 (6) 58 37 21
Trading and Positioning 52 (49) 101 3 226 (223)
Unallocated (6) (6) - (12) (10) (2)
Total $181 $164 $ 17 $345 $481 $(136)
</TABLE>
Client Finance - Client Finance income in the second quarter of 1994
was $36 million, a $7 million decrease from the strong first quarter
results of $43 million. Income for the first half of 1994 rose to $79
million, more than double the results from the comparable half-year period
in 1993. The first half growth was principally attributable to strong
performance in loan syndications and high yield bond underwritings,
accompanied by a decrease in the credit cost related to the loan portfolio.
Client Advisory - Client Advisory income declined $7 million in the
second quarter of 1994, to $23 million. Income rose over 40 percent in the
first half of 1994, to $53 million, versus the comparable half-year period
in 1993 as the majority of products earned higher revenue, led by funds
management products in Australia. Additionally, both the private banking
and core investment management areas also experienced improved revenue
performance, offset by increased staffing costs. Performance-based funds
management fees were down during the second quarter relative to both the
first quarter and comparable 1993 periods. This function also produced
improved results at the Corporation's Chilean insurance subsidiary,
Consorcio Nacional de Seguros S.A., compared to the prior year's results.
Client Financial Risk Management - Client Financial Risk Management
income during the second quarter of 1994 slowed by 56 percent to $50
million, compared to the record results achieved in the first quarter,
reflecting the generally adverse conditions and uncertain outlook
prevailing in the United States and European markets, which tended to
curtail client demand in those markets for risk management products.
Income during the first half of 1994 was $164 million, just above the
results achieved in the comparable half-year period in 1993. Results by
product were all generally comparable with 1993 levels. The demand for
risk management products during this period increased over 1993 levels in
the emerging markets of Southeast Asia and Latin America.
<PAGE>
<PAGE> 10
Client Transaction Processing - Client Transaction Processing income
declined to $26 million during the second quarter of 1994, from $32 million
in the first quarter. Transaction processing volumes generally remained at
levels consistent with the first quarter of 1994 and above the comparable
1993 periods. Although revenues declined slightly in the second quarter of
1994, profit margins in core cash management and securities custody and
clearance activities remained generally improved relative to the comparable
1993 periods, as expenses were held relatively flat. The period also
benefited from slightly higher earnings on balances generated in the
business. As a result, Client Transaction Processing income increased 57
percent over the reported 1993 half-year levels, to $58 million.
Trading and Positioning - Although the extremely difficult market
conditions which prevailed early in the year have abated, the trading
environment has continued to remain generally unfavorable in the second
quarter of 1994. In this difficult environment, the Corporation posted
Trading and Positioning income of $52 million in the second quarter of 1994
including the impact of the Brazilian Brady bonds and Past-Due Interest
bonds, versus the first quarter loss of $49 million. As a result, the
Corporation posted year-to-date Trading and Positioning income of $3
million.
REVENUE
The table below shows net interest revenue, average balances and
average rates. The tax equivalent adjustment is made to present the
revenue and yields on certain assets, primarily tax-exempt securities and
loans, as if such revenue were taxable.
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
NET INTEREST REVENUE (in millions)
Book basis $309 $299 $679 $599
Tax equivalent adjustment 21 20 42 35
Fully taxable basis $330 $319 $721 $634
AVERAGE BALANCES (in millions)
Interest-earning assets $74,107 $79,268 $77,553 $75,317
Interest-bearing liabilities 71,197 71,210 74,547 68,024
Earning assets financed by
noninterest-bearing funds $ 2,910 $ 8,058 $ 3,006 $ 7,293
AVERAGE RATES (fully taxable basis)
Yield on interest-earning assets 6.91% 5.50% 6.52% 5.68%
Cost of interest-bearing liabilities 5.33 4.33 4.83 4.41
Interest rate spread 1.58 1.17 1.69 1.27
Contribution of noninterest-bearing
funds .21 .44 .18 .43
Net interest margin 1.79% 1.61% 1.87% 1.70%
</TABLE>
<PAGE>
<PAGE> 11
REVENUE (continued)
Net interest revenue for the second quarter of 1994 totaled $309
million, up $10 million from the second quarter of 1993.
Net interest revenue was $679 million for the first six months of
1994, up $80 million, or 13 percent, from the first half of 1993. This
increase was primarily attributable to an improved interest rate spread,
partially offset by an increase in average interest-bearing liabilities.
The Corporation views trading revenue and trading-related net interest
revenue in combination, as quantified below (in millions):
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Trading Revenue $124 $405 $138 $751
Trading-Related Net
Interest Revenue 121 122 298 239
Total $245 $527 $436 $990
</TABLE>
Second Quarter 1994 vs. Second Quarter 1993
The $282 million decrease in the trading revenue and trading-related
net interest revenue combined total from the results achieved in the second
quarter of 1993 was primarily attributable to sharply lower revenue from
proprietary trading and positioning activities, as generally rising
interest rates and related volatility in the United States and European
markets made positioning activities difficult. In addition, these market
conditions contributed to lower revenue during the quarter for the Firm's
traditional interest rate and currency risk management products.
On April 15, 1994, a debt exchange took place between the Brazilian
government and its commercial bank creditors, including the Corporation,
thereby completing the long-awaited refinancing of Brazil's medium- and
long-term debt. Subsequent sales of these Brady bonds and Past-Due
Interest bonds by the Corporation have had a significant positive impact on
trading revenue and, to a lesser extent, net interest revenue for the
second quarter of 1994.
Six Months 1994 vs. Six Months 1993
For the six months ended June 30, 1994, the combined trading revenue
and trading-related net interest revenue decreased $554 million. This
decline was primarily attributable to lower revenue from proprietary
trading and positioning activities, as generally rising interest rates and
related volatility in the United States and European markets made
positioning activities difficult during the first half of 1994. The main
areas of reduced revenue were sovereign bond trading, foreign exchange
trading, and the trading of emerging markets debt and equity issues. Also
impacting trading revenue and net interest revenue for the six months ended
June 30, 1994, as mentioned above, was the sale of Brazilian Brady and
Past-Due Interest bonds.<PAGE>
<PAGE> 12
REVENUE (continued)
Shown below is a comparison of the components of noninterest revenue
(in millions).
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, Increase June 30, Increase
1994 1993(Decrease) 1994 1993(Decrease)
<S> <C> <C> <C> <C> <C> <C>
Trading $124 $405 $(281) $ 138 $ 751 $(613)
Fiduciary and funds
management 187 176 11 375 335 40
Fees and commissions
Corporate finance fees 115 102 13 223 180 43
Service charges on
deposit accounts 22 24 (2) 44 47 (3)
Acceptances and letters
of credit commissions 10 13 (3) 21 25 (4)
Other 48 34 14 89 68 21
Total fees and commissions 195 173 22 377 320 57
Securities available for
sale gains 19 - 19 23 - 23
Investment securities gains - 8 (8) - 12 (12)
Other noninterest revenue
Insurance premiums 41 27 14 96 65 31
Net revenue from equity
investment transactions,
including write-offs 26 28 (2) 55 58 (3)
Other 45 15 30 78 25 53
Total other noninterest
revenue 112 70 42 229 148 81
Total noninterest revenue $637 $832 $(195) $1,142 $1,566 $(424)
</TABLE>
Second Quarter 1994 vs. Second Quarter 1993
Fiduciary and funds management revenue totaled $187 million for the
second quarter, up $11 million, or 6 percent, from the same period last
year. The increased revenue reflected higher levels of global private
banking assets under management as well as new business in cash and
securities processing, retirement services and corporate trust, offset in
part by lower performance-based fees from foreign exchange funds managed.
Fees and commissions of $195 million increased by $22 million, or 13
percent, from the second quarter of 1993. Corporate finance fees of $115
million increased by $13 million to their second highest level in nearly
five years, led by higher revenue from financial advisory, private
placement and merger and acquisition activities. These results were
partially offset by lower leasing syndication and securities underwriting
fees. Also impacting fees and commissions was higher fees from the
structuring of products for employee benefit plans.
Other noninterest revenue totaled $112 million, up $42 million from
the prior year's quarter. This increase was due to several factors
including the impact of an insurance settlement related to the January 1993
fire at the Corporation's headquarters at 280 Park Avenue, higher insurance
premium revenue from operations in Chile and a gain from the revaluation of
non-trading foreign currency investments, versus a loss in the prior year. <PAGE>
<PAGE> 13
Six Months 1994 vs. Six Months 1993
Fiduciary and funds management revenue of $375 million increased $40
million, or 12 percent, from the first six months of 1993. Continued
growth in private banking assets under management contributed significantly
to this increase. Increases were also recorded by most other business
activities within this revenue category, except for performance-based fees
from foreign exchange funds managed, which declined during this period.
Fees and commissions increased $57 million, or 18 percent, from the
first half of 1993. The $43 million, or 24 percent, increase in corporate
finance fees was due mostly to higher fees from loan syndication, financial
advisory, merger and acquisition and private placement activities, offset
in part by lower leasing syndication fees.
Other noninterest revenue totaled $229 million, up $81 million from
the first half of 1993. This increase was due to several factors including
higher insurance premium revenue from operations in Chile, the impact of an
insurance settlement related to the January 1993 fire at the Corporation's
headquarters at 280 Park Avenue, a lower level of losses from the
revaluation of non-trading foreign currency investments and an increase in
equity in income of unconsolidated subsidiaries.
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
The Corporation recorded $5 million of net charge-offs and no
provision for credit losses in the second quarter of 1994. In the prior
year's quarter, net charge-offs of $51 million and a provision for credit
losses of $23 million were recognized. All of the $16 million of
nonrefinancing country net charge-offs for the current quarter related to
real estate loans and in the prior year's second quarter, virtually all of
the $46 million of nonrefinancing country net charge-offs also related to
real estate loans. Refinancing country net recoveries for the second
quarter of 1994 were $11 million, compared with net charge-offs of $5
million for the second quarter of 1993, which included $25 million of gross
charge-offs of nonperforming medium- and long-term loans to Brazilian
borrowers largely offset by an $18 million recovery recorded on the sale of
refinancing country loans.
For the six months ended June 30, 1994, the Corporation recorded $16
million of net recoveries and no provision for credit losses, compared with
$172 million of net charge-offs and a $53 million provision for credit
losses for the same period last year. Nonrefinancing country net charge-
offs were $14 million in the first half of 1994, compared with $168 million
for the first six months of 1993. The 1993 amount included a charge-off of
$66 million which resulted from the sale of Mexican government Par Bonds,
as well as $51 million of real estate loans and $17 million of loans to
highly leveraged borrowers.
<PAGE>
<PAGE> 14
PROVISION AND ALLOWANCE FOR CREDIT LOSSES (continued)
The provision for credit losses and the other changes in the allowance
for credit losses are shown below (in millions).
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Allowance for credit losses
Balance, beginning of period $1,345 $1,529 $1,324 $1,620
Net charge-offs
Charge-offs 17 75 38 205
Recoveries 12 24 54 33
Total net charge-offs (recoveries)* 5 51 (16) 172
Provision for credit losses - 23 - 53
Balance, end of period $1,340 $1,501 $1,340 $1,501
*Components:
Secured by real estate $ 14 $44 $ 12 $ 50
Real estate related 2 - 2 1
Highly leveraged - - (9) 17
Other - 2 9 100
Refinancing country (11) 5 (30) 4
Total $ 5 $51 $(16) $172
</TABLE>
The allowance for credit losses, at $1.340 billion at June 30, 1994,
was down $5 million from its level at March 31, 1994, and was up $16
million from December 31, 1993. The allowance was equal to 180 percent,
156 percent and 136 percent of total cash basis loans at June 30, 1994,
March 31, 1994 and December 31, 1993, respectively. The Corporation
believes that its allowance must be viewed in its entirety and therefore is
available for potential credit losses in its entire portfolio, including
loans, credit-related commitments, derivatives and other financial
instruments.
In the opinion of management, the allowance, when taken as a whole, is
adequate to absorb reasonably estimated credit losses inherent in the
Corporation's portfolio.
EXPENSES
Second Quarter 1994 vs. Second Quarter 1993
Total noninterest expenses of $688 million decreased by $61 million
from the second quarter of 1993. Incentive compensation and employee
benefits expense decreased $111 million, or 35 percent, almost entirely due
to lower bonus expense reflecting the reduced earnings. Salaries expense
increased $22 million, or 13 percent, from the second quarter of 1993. The
average number of employees increased by 4 percent versus the same period,
to 13,833.
<PAGE>
<PAGE> 15
EXPENSES (continued)
All other expenses totaled $297 million for the quarter, up $28
million, or 10 percent, from last year's second quarter. Increases in the
provision for policyholder benefits, service bureaus and agency personnel
fees were offset in part by a decrease in other real estate expense.
Six Months 1994 vs. Six Months 1993
Total noninterest expenses of $1.329 billion for the first six months
of 1994 decreased by $101 million from the first half of 1993. Incentive
compensation and employee benefits expense decreased $220 million, or 38
percent, almost entirely due to lower bonus expense reflecting the reduced
earnings. Salaries expense increased $34 million, or 10 percent, from the
first half of 1993. The average number of employees increased by 5 percent
versus the same period, to 13,740.
All other expenses for the first six months of 1994 totaled $599
million, up $85 million, or 17 percent, from the first half of 1993.
Increases in the provision for policyholder benefits, service bureaus,
agency personnel fees and minority interest accounted for most of this
increase.
INCOME TAXES
Income tax expense for the second quarter of 1994 amounted to $77
million, compared with $108 million for the second quarter of 1993. For
the first six months of 1994, income tax expense was $147 million, compared
with $201 million for the first six months of 1993. The effective tax rate
was 30 percent for the quarter and six months ended June 30, 1994, compared
with 30 percent and 29 percent for the quarter and six months ended
June 30, 1993, respectively. The six month figure for 1993 excludes the
income taxes included in the reported cumulative effects of accounting
changes for SFAS 106 and SFAS 112.
EARNINGS PER COMMON SHARE
Primary and fully diluted earnings per common share amounts were
computed by subtracting from earnings the dividend requirements on
preferred stock to arrive at earnings applicable to common stock and
dividing those amounts by the average number of common and common
equivalent shares outstanding during the period.
For both primary and fully diluted earnings per share, the average
number of common and common equivalent shares outstanding was the sum of
the average number of shares of common stock outstanding and the
incremental number of shares issuable under outstanding stock options and
deferred stock awards that had a dilutive effect as computed under the
treasury stock method. Under this method, the number of incremental shares
is determined by assuming the issuance of the outstanding stock options and
deferred stock awards reduced by the number of shares assumed to be
repurchased from the issuance proceeds, using the market price of the
Parent Company's common stock. For primary earnings per share, this market
price is the average market price for the period, while for fully diluted
earnings per share, it is the period-end market price if it is higher than
the average market price. At no time during the three and six month
periods ended June 30, 1994 and 1993 did the Corporation have outstanding
any securities which were convertible to the Parent Company's common stock.<PAGE>
<PAGE> 16
EARNINGS PER COMMON SHARE (continued)
The earnings applicable to common stock and the number of shares used
for primary and fully diluted earnings per share were as follows (in
millions):
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Earnings applicable to common stock:
Income before cumulative effects
of accounting changes $172 $246 $331 $469
Cumulative effects of accounting changes - - - (75)
Net income $172 $246 $331 $394
Average number of common shares
outstanding 79.432 82.785 79.870 82.862
Primary earnings per share
Average number of common and common
equivalent shares outstanding 82.168 84.779 82.914 84.680
Fully diluted earnings per share
Average number of common and common
equivalent shares outstanding -
assuming full dilution 82.213 84.955 82.936 84.872
</TABLE>
<PAGE>
<PAGE> 17
BALANCE SHEET ANALYSIS
The following table highlights the changes in the balance sheet.
Since quarter-end balances can be distorted by one-day fluctuations, an
analysis of changes in the quarterly averages is provided to give a better
indication of balance sheet trends.
<TABLE>
<CAPTION>
CONDENSED AVERAGE BALANCE SHEETS
(in millions)
2nd Qtr 1st Qtr 4th Qtr
1994 1994 1993
<S> <C> <C> <C>
ASSETS
Interest-bearing deposits with banks $ 1,273 $ 1,512 $ 2,042
Federal funds sold 425 279 488
Securities purchased under resale
agreements 13,007 12,866 8,791
Securities borrowed 4,622 3,788 2,343
Trading assets 35,977 43,007 41,942
Securities available for sale
Taxable 4,828 5,294 -
Exempt from federal income taxes 1,389 1,288 -
Total securities available for sale 6,217 6,582 -
Investment securities
Taxable - - 5,541
Exempt from federal income taxes - - 1,030
Total investment securities - - 6,571
Loans 12,586 13,003 14,211
Total interest-earning assets 74,107 81,037 76,388
Cash and due from banks 1,826 2,020 1,971
Noninterest-earning trading assets 19,297 19,359 3,772
All other assets 8,015 8,046 6,528
Allowance for credit losses (1,349) (1,349) (1,494)
Total $101,896 $109,113 $87,165
LIABILITIES
Interest-bearing deposits
In domestic offices $ 6,193 $ 7,065 $ 8,511
In foreign offices 11,144 11,472 12,410
Total interest-bearing deposits 17,337 18,537 20,921
Trading liabilities 9,616 12,223 7,430
Securities sold under repurchase agreements 22,265 24,120 21,671
Other short-term borrowings 16,361 17,361 14,504
Long-term debt 5,618 5,694 5,450
Total interest-bearing liabilities 71,197 77,935 69,976
Noninterest-bearing deposits 3,623 4,154 3,932
Noninterest-bearing trading liabilities 14,748 15,358 1,694
All other liabilities 7,280 6,814 6,883
Total liabilities 96,848 104,261 82,485
PREFERRED STOCK OF SUBSIDIARY 250 250 250
STOCKHOLDERS' EQUITY
Preferred stock 450 259 250
Common stockholders' equity 4,348 4,343 4,180
Total stockholders' equity 4,798 4,602 4,430
Total $101,896 $109,113 $87,165
<FN>
The condensed average balance sheets are presented on a different basis than the spot
balance sheets, in that the various categories of interest-earning assets and interest-
bearing liabilities exclude certain noninterest-earning/bearing components included in
the spot balance sheet captions. These components are included in "all other assets"
and "all other liabilities" in the condensed average balance sheets.
</TABLE>
<PAGE>
<PAGE> 18
BALANCE SHEET ANALYSIS (continued)
Second Quarter 1994 vs. First Quarter 1994
The Corporation's average total assets amounted to $101.9 billion for
the second quarter of 1994, a decrease of $7.2 billion, or 7 percent, from
the first quarter of 1994. Average interest-earning assets decreased $6.9
billion, or 9 percent, and the proportion of interest-earning assets to
total assets decreased slightly, from 74 percent to 73 percent. The
decrease in interest-earning assets was primarily due to the decrease in
interest-earning trading assets (down $7.0 billion, or 16 percent). As a
percentage of average total assets, interest-earning trading assets
decreased from 39 percent to 35 percent in the second quarter of 1994.
Interest-bearing liabilities decreased $6.7 billion, or 9 percent,
from the first quarter of 1994. This decrease was primarily attributable
to decreases in trading liabilities (down $2.6 billion, or 21 percent),
securities sold under repurchase agreements (down $1.9 billion, or 8
percent), total interest-bearing deposits (down $1.2 billion, or 6 percent)
and other short-term borrowings (down $1.0 billion, or 6 percent). Total
short-term borrowings (securities sold under repurchase agreements and other
short-term borrowings) as a percentage of total interest-bearing
liabilities increased slightly to 54 percent, from 53 percent in the first
quarter of 1994.
Second Quarter 1994 vs. Fourth Quarter 1993
The Corporation's average total assets for the second quarter of 1994,
increased $14.7 billion, or 17 percent, from the fourth quarter of 1993.
Noninterest-earning trading assets increased $15.5 billion due primarily to
the adoption of FASB Interpretation No. 39, effective January 1, 1994.
Average interest-earning assets decreased $2.3 billion and the proportion
of interest-earning assets to total assets decreased, from 88 percent to 73
percent, due primarily to the adoption of FASB Interpretation No. 39. The
decrease in interest-earning assets was primarily due to decreases in
interest-earning trading assets (down $6.0 billion, or 14 percent) and
loans (down $1.6 billion, or 11 percent) offset by increases in securities
purchased under resale agreements (up $4.2 billion, or 48 percent) and
securities borrowed (up $2.3 billion, or 97 percent). As a percentage of
average total assets, interest-earning trading assets decreased from 48
percent to 35 percent in the second quarter of 1994, while loans decreased
from 16 percent to 12 percent.
Average total liabilities increased $14.4 billion, or 17 percent, from
the fourth quarter of 1993. Noninterest-bearing trading liabilities
increased $13.1 billion due primarily to the adoption of FASB
Interpretation No. 39. Interest-bearing liabilities increased $1.2
billion, or 2 percent, from last year's fourth quarter. This increase was
primarily attributable to higher levels of trading liabilities (up $2.2
billion, or 29 percent) and other short-term borrowings (up $1.9 billion,
or 13 percent) offset in part by a decrease in total interest-bearing
deposits (down $3.6 billion, or 17 percent). Total short-term borrowings
(securities sold under repurchase agreements and other short-term
borrowings) as a percentage of total interest-bearing liabilities increased
to 54 percent, from 52 percent in the fourth quarter of 1993.
<PAGE>
<PAGE> 19
BALANCE SHEET ANALYSIS (continued)
Trading Assets and Trading Liabilities
The components of these accounts, which are carried at market value,
were as follows (in millions):
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
TRADING ASSETS
U.S. government and agency securities $15,253 $19,648
Obligations of U.S. states and
political subdivisions 252 494
Foreign government securities 8,332 13,229
Corporate debt securities 5,542 5,565
Equity securities 3,767 3,804
Bankers acceptances and certificates
of deposit 1,928 2,178
Swaps, options and other
derivative contracts (1) 16,356 732
Other 3,239 2,626
Total trading assets $54,669 $48,276
TRADING LIABILITIES
Securities sold, not yet purchased
U.S. government and agency securities $ 6,525 $4,023
Foreign government securities 1,963 3,099
Equity securities 1,929 1,644
Other 971 583
Swaps, options and other
derivative contracts (1) 13,763 -
Total trading liabilities $25,151 $9,349
<FN>
(1) Comprised of fair values of interest rate instruments, foreign exchange
rate instruments, and equity and commodity instruments, reduced by the
effects of master netting agreements, in accordance with FASB
Interpretation No. 39, at June 30, 1994. At December 31, 1993, prior to
the adoption of FASB Interpretation No. 39, the Corporation's policy was
to record the unrealized gains and losses on these contracts on a net basis.
</TABLE>
<PAGE>
<PAGE> 20
BALANCE SHEET ANALYSIS (continued)
Securities Available for Sale
The fair value, amortized cost and gross unrealized holding gains and
losses for the Corporation's securities available for sale follow (in
millions):
<TABLE>
<CAPTION>
June 30, March 31, December 31,
1994 1994 1993
<S> <C> <C> <C>
Fair value $6,961 $5,791 $7,073
Amortized cost 6,783 5,585 6,898
Excess of fair value over
amortized cost (1) $ 178 $ 206 $ 175
<FN>
(1) Components:
Unrealized gains $254 $279 $ 308
Unrealized losses (76) (73) (133)
$178 $206 $ 175
</TABLE>
Long-term Debt
During the second quarter of 1994, the Corporation obtained $404
million of cash proceeds from the issuances of long-term debt and repaid
$529 million of long-term debt. The larger of these debt issuances and
redemptions were as follows (in millions):
<TABLE>
<CAPTION>
Face Amount
Issuances Redemptions
<S> <C> <C>
Parent Company
Japanese Yen Libor Linked Notes
due October 1996 to October 1997 $86
9-3/8% Notes due May 1994 $150
Bankers Trust Company
Bank Notes due April 1995
to September 2000 $91
Step-Down Coupon Notes
due March 1999 $97
</TABLE>
<PAGE>
<PAGE> 21
END-USER DERIVATIVES
The Corporation, as an end user, utilizes various types of derivative
products (principally interest rate swaps) to manage the interest rate,
currency and other market risks associated with liabilities and assets such
as interest-bearing deposits, short-term borrowings and long-term debt as
well as investments in non-marketable equity instruments and net
investments in foreign entities. End-user derivative products are
accounted for on an accrual basis, that is, revenue or expense pertaining
to management of interest rate exposure is recognized over the life of the
contract as an adjustment to interest revenue or expense.
At June 30, 1994, the Corporation reviewed its characterization of
certain derivative contracts associated with short-term borrowings and
long-term debt. Based upon this review, certain trading derivative
contracts previously disclosed as end-user derivatives at March 31, 1994,
have been appropriately excluded. This exclusion had no impact on net
income. At June 30, 1994, total net end-user derivative unrealized losses
were $199 million. On a comparable basis, total net end-user derivative
unrealized losses were $53 million at March 31, 1994. The $146 million
increase during the second quarter of 1994 was due to significant increases
in interest rates.
The following table provides the gross gains and gross losses not yet
recognized in the financial statements for end-user derivatives applicable
to certain hedged assets and liabilities (in millions):
<TABLE>
<CAPTION>
Other
short-
Interest- term Long-
Other bearing borrow- term
June 30, 1994 assets deposits ings debt Total
<S> <C> <C> <C> <C> <C>
Interest Rate Swap
Pay Variable Unrealized Gain $- $ 41 $ 3 $ 59 $ 103
Pay Variable Unrealized (Loss) - (97) (7) (134) (238)
Pay Variable Net - (56) (4) (75) (135)
Pay Fixed Unrealized Gain - 47 - 24 71
Pay Fixed Unrealized (Loss) - (62) - (39) (101)
Pay Fixed Net - (15) - (15) (30)
Total Unrealized Gain - 88 3 83 174
Total Unrealized (Loss) - (159) (7) (173) (339)
Total Net $- $ (71) $ (4)$ (90) $(165)
Currency Swap
Unrealized Gain $ - $ 1 $ 1 $17 $ 19
Unrealized (Loss) (2) (3) (6) (3) (14)
Net $(2) $(2) $(5) $14 $ 5
Equity Swap/Collar
Unrealized Gain $ 9 $- $- $- $ 9
Unrealized (Loss) (48) - - - (48)
Net $(39) $- $- $- $(39)
Total Unrealized Gain $ 9 $ 89 $ 4 $ 100 $ 202
Total Unrealized (Loss) (50) (162) (13) (176) (401)
Total Net $(41) $ (73) $ (9)$ (76) $(199)
/TABLE
<PAGE>
<PAGE> 22
END-USER DERIVATIVES (continued)
Derivatives which are used to manage the risks associated with
securities available for sale are carried at fair value. The unrealized
gains and unrealized losses on derivatives included in securities available
for sale amounted to $24 million and $26 million, respectively, at June 30,
1994, with the corresponding offset to securities valuation allowance in
stockholders' equity.
End-user derivatives used to manage foreign exchange risk associated
with net investments in foreign subsidiaries generated a net unrealized
loss of $11 million.
For pay variable and pay fixed interest rate swaps entered into as end
user, the weighted average receive rate and weighted average pay rate
(interest rates were based on the weighted averages of both U.S. and non-
U.S. currencies) by maturity and corresponding notional amounts at June 30,
1994 were as follows ($ in millions):
<TABLE>
<CAPTION>
Notional
Amount Paying Variable(1) Paying Fixed
Maturing Notional Receive Pay Notional Receive Pay Total
In: Amount Rate Rate Amount Rate Rate Notional
<S> <C> <C> <C> <C> <C> <C> <C>
1994 $ 5,113 4.35% 4.43% $ 928 4.57%6.43% $ 6,041
1995-1996 8,912 5.18 4.13 3,127 4.36 5.75 12,039
1997-1998 3,229 5.43 4.28 1,231 4.26 6.38 4,460
1999 and thereafter 4,294 6.14 4.21 1,460 4.44 8.09 5,754
Total $21,548 $6,746 $28,294
<FN>
(1) Variable rates were those in effect at June 30, 1994.
</TABLE>
<PAGE>
<PAGE> 23
REGULATORY CAPITAL
The Federal Reserve Board's capital adequacy guidelines mandate that
minimum ratios ("FRB Minimum Regulatory Guidelines") be maintained by bank
holding companies and banks. The Corporation's 1993 Annual Report on Form
10-K, on page 39, provides a detailed discussion of both these regulatory
capital guidelines and the federal bank regulations regarding capital tiers
under the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") for the Corporation's bank subsidiaries.
Based on their respective regulatory capital ratios at June 30, 1994,
both Bankers Trust Company ("BTCo.") and Bankers Trust (Delaware) are well
capitalized, based on the definitions in the regulations issued by the
Federal Reserve Board and the other federal bank regulatory agencies
setting forth the general capital requirements mandated by FDICIA.
All three regulatory capital ratios, at both June 30, 1994 and
December 31, 1993, excluded any benefit from the adoption of SFAS 115.
The table below indicates the regulatory capital ratios of the
Corporation and BTCo. and the minimum regulatory guidelines.
<TABLE>
<CAPTION>
FRB
Minimum
June 30, December 31, Regulatory
1994 1993 Guidelines
<S> <C> <C> <C>
CORPORATION
Risk-Based Ratios
Tier 1 Capital 8.41% 8.50% 4.0%
Total Capital 13.82% 14.46% 8.0%
Leverage Ratio 5.97% 6.28% 3.0%
BTCo.
Risk-Based Ratios
Tier 1 Capital 9.12% 9.38% 4.0%
Total Capital 12.20% 12.96% 8.0%
Leverage Ratio 6.33% 6.01% 3.0%
</TABLE>
The following were the essential components of the Corporation's risk-
based capital ratios (in millions):
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
Tier 1 Capital $4,488 $4,072
Tier 2 Capital 2,882 2,859
Total Capital $7,370 $6,931
Total risk-weighted assets $53,342 $47,916
</TABLE>
<PAGE>
<PAGE> 24
REGULATORY CAPITAL (continued)
During the first half of 1994, each of the Corporation's three
regulatory capital ratios declined. The Tier I Capital and Total Capital
ratios declined by 9 basis points and 64 basis points, respectively, as the
increase in capital was more than offset by the increase in total risk-
weighted assets. The Leverage Ratio decreased by 31 basis points as a
result of a 16 percent increase in quarterly average total assets,
primarily due to the adoption of FASB Interpretation No. 39. The $416
million increase in Tier 1 Capital was primarily attributable to the
issuance of Series Q Preferred Stock, the retention of earnings and the
inclusion of net deferred tax assets which are permissible for regulatory
capital. The Corporation's total risk-weighted assets at June 30, 1994
were $5.426 billion higher than at year-end 1993.
LIQUIDITY
Liquidity management at the Corporation focuses on both asset
liquidity and liability management. Enhancing asset liquidity remains a
particularly important element of its liquidity management philosophy. At
the same time, management is continually seeking opportunities to further
diversify the Corporation's funding sources.
Liquid assets consist of cash and due from banks, interest-bearing
deposits with banks, federal funds sold, securities purchased under resale
agreements, securities borrowed, trading assets and securities available
for sale. At June 30, 1994, the Corporation's liquid assets amounted to
$85.1 billion, or 81 percent of gross total assets, compared with 79
percent and 77 percent, respectively, at March 31, 1994 and December 31,
1993.
Cash Flows
The following comments apply to the consolidated statement of cash
flows, which appears on page 6.
Cash and due from banks increased $912 million during the first six
months of 1994, as the net cash provided by operating activities exceeded
the sum of net cash used in investing and financing activities. The $10.4
billion of net cash provided by operating activities primarily resulted
from a $10.0 billion net change in trading assets and liabilities. Within
the investing activities category, cash outflows from purchases of
securities available for sale ($3.4 billion) as well as net changes in
securities purchased under resale agreements ($2.7 billion), securities
borrowed ($2.5 billion) and federal funds sold ($1.2 billion) were offset
in part by cash inflows from sales, maturities and other redemptions of
securities available for sale ($3.0 billion) and a net change in loans
($1.9 billion). The $4.7 billion of net cash used in financing activities
primarily resulted from net changes of $2.8 billion in deposits and $2.4
billion in securities sold under repurchase agreements.
For the six months ended June 30, 1993, cash and due from banks
increased $272 million, as net cash provided by financing activities
exceeded the sum of net cash used in operating and investing activities.
The $7.7 billion of net cash provided by financing activities primarily
<PAGE>
<PAGE> 25
LIQUIDITY (continued)
resulted from a $7.6 billion increase in securities sold under repurchase
agreements. The $5.9 billion of net cash used in operating activities
primarily resulted from $6.6 billion of net cash outflows from changes in
operating assets and liabilities (which amount included an $8.6 billion
increase in net trading assets) as well as a $1.6 billion net change in
receivables and payables from securities transactions, offset in part by
$666 million of earnings adjusted for noncash charges and credits. Within
the investing activities category, cash outflows from purchases of
investment securities ($5.4 billion) and net changes in securities
purchased under resale agreements ($1.8 billion) and securities borrowed
($551 million) were offset in part by cash inflows from sales, maturities
and other redemptions of investment securities ($4.2 billion) as well as
net changes in loans ($916 million), interest-bearing deposits with banks
($836 million) and federal funds sold ($438 million).
Interest Rate Sensitivity
Condensed interest rate sensitivity data for the Corporation at
June 30, 1994 is presented in the table below. For purposes of this
presentation, the interest-earning/bearing components of trading assets and
trading liabilities are assumed to reprice within three months.
Since the interest rate gaps are actively managed and change daily as
adjustments are made in interest rate views and market outlook, positions
at the end of any period may not be reflective of the Corporation's
interest rate view in subsequent periods. Active management dictates that
longer term economic views are balanced against prospects of short-term
interest rate changes in all repricing intervals.
<TABLE>
<CAPTION>
By Repricing Interval Non-
interest-
Within 1 - 5 After bearing
(in billions) June 30, 1994 1 year years 5 years funds Total
<S> <C> <C> <C> <C> <C>
Assets $ 69.2 $ 2.9 $ 2.7 $ 28.8 $103.6
Liabilities, preferred stock
of subsidiary and preferred
stock (67.0) (3.7) (2.0) (26.6) (99.3)
Common stockholders' equity - - - (4.3) (4.3)
Effect of off-balance sheet
hedging instruments (3.1) 2.5 .6 - -
Interest rate sensitivity gap $ (.9) $ 1.7 $ 1.3 $ (2.1) $ -
</TABLE>
<PAGE>
<PAGE> 26
NONPERFORMING ASSETS
The components of cash basis loans, renegotiated loans, other real
estate and other nonperforming assets are shown below ($ in millions).
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
CASH BASIS LOANS (NONREFINANCING COUNTRY)
Domestic
Commercial and industrial $191 $285
Secured by real estate 301 306
Financial institutions 24 30
Total domestic 516 621
International
Commercial and industrial 120 84
Secured by real estate 104 149
Other 2 2
Total international 226 235
Total cash basis loans (nonrefinancing country) 742 856
CASH BASIS LOANS (REFINANCING COUNTRY)
International 2 118
Total cash basis loans $744 $974
Ratio of cash basis loans to total loans 5.6% 6.4%
Ratio of allowance for credit losses to cash
basis loans 180% 136%
RENEGOTIATED LOANS
Highly leveraged $ - $ 6
Secured by real estate 13 14
Other nonrefinancing country 1 1
Total renegotiated loans $14 $21
OTHER REAL ESTATE $310 $287
OTHER NONPERFORMING ASSETS
Assets acquired in credit workouts $68 $ 85
Nonperforming derivative contracts 16 16
Total other nonperforming assets $84 $101
Loans 90 days or more past due and still
accruing interest $- $40
</TABLE>
<PAGE>
<PAGE> 27
NONPERFORMING ASSETS (continued)
An analysis of the changes in the Corporation's total cash basis loans
during the first six months of 1994 follows (in millions).
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1993 $974
Net transfers from accrual status 70
Net paydowns (83)
Charge-offs (36)
Transfers to other real estate (46)
Transfers to other nonperforming assets (2)
Loan sales (47)
Other (86)
Balance, June 30, 1994 $744
</TABLE>
The Corporation's total cash basis loans amounted to $744 million
at June 30, 1994, down $230 million, or 24 percent, from December 31, 1993.
Nonrefinancing country cash basis loans decreased $114 million and the
refinancing country component of the cash basis portfolio decreased $116
million during the first half of 1994.
Within total nonrefinancing country cash basis loans were loans
secured by real estate of $405 million and $455 million at June 30, 1994
and December 31, 1993, respectively. Also within nonrefinancing country
cash basis loans, loans to highly leveraged borrowers (mainly included
within the domestic commercial and industrial category in the table on page
26) decreased by $23 million, to $170 million, during the first six months
of 1994. Other real estate increased by $23 million and assets acquired in
credit workouts decreased by $17 million during the same period.
<PAGE>
<PAGE> 28
NONPERFORMING ASSETS (continued)
The following table sets forth the approximate effect on interest
revenue of cash basis loans and renegotiated loans. This disclosure
reflects the interest on loans which were carried on the balance sheet and
classified as either cash basis or renegotiated at June 30 of each year.
The rates used in determining the gross amount of interest that would have
been recorded at the original rate were not necessarily representative of
current market rates.
<TABLE>
<CAPTION>
Six Months Ended
June 30,
(in millions) 1994 1993
<S> <C> <C>
Domestic Loans
Gross amount of interest that would have
been recorded at original rate $21 $30
Less, interest, net of reversals, recognized
in interest revenue 2 5
Reduction of interest revenue 19 25
International Loans
Gross amount of interest that would have
been recorded at original rate 9 26
Less, interest, net of reversals, recognized
in interest revenue 2 28
Reduction of (Increase in) interest revenue 7 (2)
Total reduction of interest revenue $26 $23
</TABLE>
<PAGE>
<PAGE> 29
HIGHLY LEVERAGED TRANSACTIONS
Amounts included in the table and discussion which follow are
generally based on the definition that the Corporation uses in order to
monitor the extent of its exposure to highly leveraged transactions
("HLTs"). The Corporation's 1993 Annual Report on Form 10-K, on page 45,
provides a detailed discussion of the definition.
<TABLE>
<CAPTION>
Highly Leveraged Transactions
June 30,December 31,
(in millions) 1994 1993
<S> <C> <C>
Loans
Senior debt $582 $1,314
Subordinated debt 127 126
Total loans $709 $1,440
Unfunded commitments
Commitments to lend $303 $603
Letters of credit 185 201
Total unfunded commitments $488 $804
Equity investments $389 $477
Commitments to invest $155 $127
</TABLE>
The Corporation's outstanding loans were to 83 separate borrowers in
35 separate industry groups at June 30, 1994, compared to 105 separate
borrowers in 35 separate industry groups at December 31, 1993. There were
no industry concentrations which exceeded 10 percent of total HLT loans
outstanding at June 30, 1994.
In addition to the amounts shown in the table above, at June 30, 1994,
the Corporation had issued commitment letters which had been accepted,
subject to documentation and certain other conditions, of $587 million
(which were in various stages of syndication) and had additional HLTs in
various stages of discussion and negotiation.
During the first half of 1994, the Corporation originated $816 million
of HLT commitments, of which $273 million were sold, syndicated or
participated, on a non-recourse basis.
All loans and commitments to finance HLTs are reviewed and approved by
senior credit officers of the Corporation. In addition to a strict
transactional and credit approval process, the portfolio of leveraged loans
and commitments is actively monitored and managed to minimize risk through
diversification among borrowers and industries. As part of this strategy,
sell and hold targets are regularly updated in connection with market
<PAGE>
<PAGE> 30
HIGHLY LEVERAGED TRANSACTIONS (continued)
opportunities and the addition of new HLTs. Retention by the Corporation
after syndication and sales of loan participations has typically been less
than $50 million, and the average outstanding for the portfolio at
June 30, 1994 was less than $9 million. However, at June 30, 1994, the
Corporation had total exposure (loans outstanding plus unfunded
commitments) in excess of $50 million to 5 separate highly leveraged
borrowers.
At June 30, 1994, $170 million of the HLT loan portfolio was on a cash
basis. In addition, $18 million of the equity investments in HLT companies
represented assets acquired in credit workouts, which are reported as other
nonperforming assets. Net recoveries of $9 million of HLT loans were
recorded in the first half of 1994. In addition, the Corporation recorded
a net gain of $34 million in connection with the sales and/or write-offs of
its equity investments in highly leveraged companies during the first half
of 1994.
Generally, fees (typically 2 to 4 percent of the principal amount
committed) and interest charged (typically LIBOR plus 1.5 to 3 percent) on
HLT loans are higher than on other credits. The Corporation does not
account for revenue or expenses from HLTs separately from its other
corporate lending activities. However, it is estimated that transaction
fees recognized for lending activities relating to HLTs were approximately
$66 million during the first half of 1994 and that as of June 30, 1994,
approximately $10 million of fees were deferred and will be recognized as
future revenue.
During the first half of 1994, the Corporation transferred
approximately $238 million of outstanding loans to highly leveraged
borrowers from its loan portfolio to trading. The transferred loans were
carried at market value upon transfer to trading. None of the loans was
classified as a nonperforming asset at the time of transfer. Accordingly,
subsequent to transfer these loans have been excluded from the
Corporation's HLT outstandings at June 30, 1994 as reported above. No
significant impact on earnings was recorded as a result of this transfer.
<PAGE>
<PAGE> 31
PART II. OTHER INFORMATION
Item 5. Other Information
ELECTION OF PHILLIP A. GRIFFITHS TO THE BOARD OF DIRECTORS
Phillip A. Griffiths, the director of the Institute for Advanced
Study, has been elected a director of Bankers Trust New York Corporation
and Bankers Trust Company.
The Institute for Advanced Study, in Princeton, N.J., is an
independent center founded in 1930 to support advanced scholarship and
fundamental research. It has a permanent faculty of distinguished scholars
and about 160 members in residence each year in its four schools:
Historical Studies, Mathematics, Natural Sciences and Social Science.
Dr. Griffiths was provost and James B. Duke Professor of Mathematics
at Duke University from 1983 until 1991, when he was named head of the
Institute for Advanced Study. He has previously served as Dwight Parker
Robinson Professor of Mathematics at Harvard University; Miller Fellow and
faculty member, University of California at Berkeley and as a professor at
Princeton University.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(4) Instruments Defining the Rights of Security Holders,
Including Indentures
(v) - The Corporation hereby agrees to furnish to the
Commission, upon request, a copy of any instru-
ments defining the rights of holders of long-term
debt issued by Bankers Trust New York Corporation
or its subsidiaries.
(12) Statement re Computation of Ratios
(b) Reports on Form 8-K - Bankers Trust New York Corporation filed
one report on Form 8-K during the quarter ended June 30, 1994.
- The report dated April 19, 1994 filed the Corporation's
Press Release dated April 19, 1994, which announced earnings
for the quarter ended March 31, 1994.
<PAGE>
<PAGE> 32
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on August 12, 1994.
BANKERS TRUST NEW YORK CORPORATION
By: GEOFFREY M. FLETCHER
Geoffrey M. Fletcher
Senior Vice President and
Principal Accounting Officer
<PAGE>
<PAGE> 33
BANKERS TRUST NEW YORK CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1994
EXHIBIT INDEX
(4) Instruments Defining the Rights of Security
Holders, Including Indentures
(v) - Long-Term Debt Indentures (a)
(12) Statement re Computation of Ratios
(a) - Computation of Consolidated Ratios of
Earnings to Fixed Charges
(b) - Computation of Consolidated Ratios of
Earnings to Combined Fixed Charges and
Preferred Stock Dividend Requirements
[FN]
(a) The Corporation hereby agrees to furnish to the Commission, upon
request, a copy of any instruments defining the rights of holders
of long-term debt issued by Bankers Trust New York Corporation or
its subsidiaries.
<PAGE>
<PAGE>
<TABLE>
EXHIBIT 12(a)
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
(dollars in millions)
<CAPTION>
Six
Months
Ended
Year Ended December 31, June 30,
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Earnings:
1. Income (loss) before
income taxes and
cumulative effects
of accounting
changes $ (815) $ 815 $ 834 $ 906 $1,550 $ 492
2. Add: Fixed charges
excluding
capitalized
interest
(Line 10) 4,803 4,826 3,614 3,099 3,148 1,800
3. Less: Equity in undistri-
buted income of
unconsolidated
subsidiaries and
affiliates 14 47 31 40 30 17
4. Earnings including
interest on deposits 3,974 5,594 4,417 3,965 4,668 2,275
5. Less: Interest on
deposits 2,253 2,226 1,589 1,119 1,013 409
6. Earnings excluding
interest on deposits $1,721 $3,368 $2,828 $2,846 $3,655 $1,866
Fixed Charges:
7. Interest Expense $4,775 $4,799 $3,585 $3,072 $3,122 $1,787
8. Estimated interest
component of net
rental expense 26 27 29 27 26 13
9. Amortization of debt issuance
expense 2 - - - - -
10. Total fixed charges
including interest on
deposits and excluding
capitalized interest 4,803 4,826 3,614 3,099 3,148 1,800
11. Add: Capitalized
interest 5 - - - - -
12. Total fixed charges 4,808 4,826 3,614 3,099 3,148 1,800
13. Less: Interest on
deposits
(Line 5) 2,253 2,226 1,589 1,119 1,013 409
14. Fixed charges excluding
interest on deposits $2,555 $2,600 $2,025 $1,980 $2,135 $1,391
Consolidated Ratios of Earnings
to Fixed Charges:
Including interest on
deposits
(Line 4/Line 12) 0.83 1.16 1.22 1.28 1.48 1.26
Excluding interest on
deposits
(Line 6/Line 14) 0.67 1.30 1.40 1.44 1.71 1.34
<FN>
For the year ended December 31, 1989, earnings, as defined above, did not cover fixed
charges, including and excluding interest on deposits, by $834 million as a result of the 1989
special provision for refinancing country credit losses of $1.6 billion.
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 12(b)
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
COMPUTATION OF CONSOLIDATED RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDEND REQUIREMENTS
(dollars in millions)
<CAPTION>
Six
Months
Ended
Year Ended December 31, June 30,
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Earnings:
1. Income (loss) before
income taxes and
cumulative effects
of accounting
changes $ (815) $ 815 $ 834 $ 906 $1,550 $ 492
2. Add: Fixed charges
excluding
capitalized
interest
(Line 13) 4,803 4,826 3,614 3,099 3,148 1,800
3. Less: Equity in undistri-
buted income of
unconsolidated
subsidiaries and
affiliates 14 47 31 40 30 17
4. Earnings including
interest on
deposits 3,974 5,594 4,417 3,965 4,668 2,275
5. Less: Interest on
deposits 2,253 2,226 1,589 1,119 1,013 409
6. Earnings excluding
interest on
deposits $1,721 $3,368 $2,828 $2,846 $3,655 $1,866
Preferred Stock Dividend Requirements:
7. Preferred stock dividend
requirements $ 7 $ 31 $ 34 $ 30 $ 23 $ 14
8. Ratio of income from
continuing operations
before income taxes to
income from continuing
operations after income
taxes * 127% 123% 125% 142% 145% 143%
9. Preferred stock dividend
requirements on a pretax
basis $ 9 $ 38 $ 43 $ 43 $ 33 $ 20
Fixed Charges:
10. Interest Expense $4,775 $4,799 $3,585 $3,072 $3,122 $1,787
11. Estimated interest
component of net
rental expense 26 27 29 27 26 13
12. Amortization of debt
issuance expense 2 - - - - -
13. Total fixed charges
including interest
on deposits and
excluding capitalized
interest 4,803 4,826 3,614 3,099 3,148 1,800
14. Add: Capitalized
interest 5 - - - - -
15. Total fixed charges 4,808 4,826 3,614 3,099 3,148 1,800
16. Add: Preferred stock
dividend require-
ments - pretax
(Line 9) 9 38 43 43 33 20
<PAGE>
<PAGE>
17. Total combined fixed
charges and preferred
stock dividend require-
ments on a pretax
basis 4,817 4,864 3,657 3,142 3,181 1,820
18. Less: Interest on
deposits
(Line 5) 2,253 2,226 1,589 1,119 1,013 409
19. Combined fixed charges
and preferred stock
dividend requirements
on a pretax basis
excluding interest on
deposits $2,564 $2,638 $2,068 $2,023 $2,168 $1,411
Consolidated Ratios of Earnings
to Combined Fixed Charges
and Preferred Stock
Dividend Requirements:
Including interest on
deposits
(Line 4/Line 17) 0.82 1.15 1.21 1.26 1.47 1.25
Excluding interest on
deposits
(Line 6/Line 19) 0.67 1.28 1.37 1.41 1.69 1.32
<FN>
* Represents income from continuing operations before income taxes, excluding the 1989 special
provision for refinancing country credit losses of $1.6 billion, divided by income from
continuing operations after income taxes, excluding the 1989 special provision for refinancing
country credit losses of $1.6 billion, which adjusts preferred stock dividend requirements to a
pretax basis.
For the year ended December 31, 1989, earnings, as defined above, did not cover combined fixed
charges and preferred stock dividend requirements, including and excluding interest on deposits,
by $843 million as a result of the 1989 special provision for refinancing country credit losses
of $1.6 billion.
</TABLE>
<PAGE>
<PAGE>
BANKERS TRUST NEW YORK CORPORATION
280 PARK AVENUE
NEW YORK, NEW YORK 10017
Geoffrey M. Fletcher
Senior Vice President and
Principal Accounting Officer
August 12, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
Accompanying this letter is Bankers Trust New York
Corporation's quarterly report on Form 10-Q for the quarter ended
June 30, 1994 (the "Form 10-Q"). The Form 10-Q is being filed
electronically through the EDGAR System. One hard copy of the Form
10-Q will be sent to the Securities and Exchange Commission's Filer
Support Unit, Alexandria, Virginia.
If there are any questions or comments in connection with the
enclosed filing, please contact the undersigned at 212-250-7098.
Very truly yours,
BANKERS TRUST NEW YORK CORPORATION
By: GEOFFREY M. FLETCHER
Geoffrey M. Fletcher
Senior Vice President and
Principal Accounting Officer
<PAGE>
