<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 September 30, 1996
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.)
130 Liberty Street
New York, New York 10006
(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 October 31, 1996: Common Stock, $1 par value,
81,748,778 shares.
<PAGE> 1
BANKERS TRUST NEW YORK CORPORATION
September 30, 1996 FORM 10-Q
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income
Three Months Ended September 30, 1996 and 1995 2
Nine Months Ended September 30, 1996 and 1995 3
Consolidated Balance Sheet
At September 30, 1996 and December 31, 1995 4
Consolidated Statement of Changes in Stockholders'
Equity
Nine Months Ended September 30, 1996 and 1995 5
Consolidated Statement of Cash Flows
Nine Months Ended September 30, 1996 and 1995 6
Consolidated Schedule of Net Interest Revenue
Three Months and Nine Months Ended
September 30, 1996 and 1995 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. The results of operations for the three
months and nine months ended September 30, 1996 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 1995 Annual Report
as supplemented by the 1996 Forms 10-Q.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 35
SIGNATURE 36
<PAGE> 2
PART I. FINANCIAL INFORMATION
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Increase
THREE MONTHS ENDED SEPTEMBER 30, 1996 1995 (Decrease)
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $1,669 $1,556 $113
Interest expense 1,421 1,352 69
Net interest revenue 248 204 44
Provision for credit losses - 7 (7)
Net interest revenue after provision
for credit losses 248 197 51
NONINTEREST REVENUE
Trading 219 257 (38)
Fiduciary & funds management 196 174 22
Corporate finance fees 119 74 45
Other fees & commissions 86 78 8
Net revenue from equity investment transactions 74 85 (11)
Securities available for sale gains 11 10 1
Insurance premiums 52 64 (12)
Other 54 13 41
Total noninterest revenue 811 755 56
NONINTEREST EXPENSES
Salaries 229 196 33
Incentive compensation & employee benefits 228 187 41
Agency & other professional service fees 70 70 -
Communication & data services 52 45 7
Occupancy, net 38 41 (3)
Furniture & equipment 42 40 2
Travel & entertainment 24 20 4
Provision for policyholder benefits 66 75 (9)
Other 60 54 6
Total noninterest expenses 809 728 81
Income before income taxes 250 224 26
Income taxes 74 69 5
NET INCOME $ 176 $ 155 $ 21
NET INCOME APPLICABLE TO COMMON STOCK $ 168 $ 139 $ 29
Cash dividends declared per common share $1.00 $1.00 $-
EARNINGS PER COMMON SHARE:
PRIMARY $1.99 $1.72 $.27
FULLY DILUTED $1.98 $1.71 $.27
<FN>
Certain prior period amounts have been reclassified to conform to the
current presentation.
</TABLE>
<PAGE> 3
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Increase
NINE MONTHS ENDED SEPTEMBER 30, 1996 1995 (Decrease)
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $4,718 $4,429 $289
Interest expense 4,014 3,821 193
Net interest revenue 704 608 96
Provision for credit losses 5 21 (16)
Net interest revenue after provision
for credit losses 699 587 112
NONINTEREST REVENUE
Trading 612 258 354
Fiduciary & funds management 577 511 66
Corporate finance fees 341 273 68
Other fees & commissions 255 235 20
Net revenue from equity investment transactions 167 124 43
Securities available for sale gains 51 29 22
Insurance premiums 177 176 1
Other 179 78 101
Total noninterest revenue 2,359 1,684 675
NONINTEREST EXPENSES
Salaries 632 598 34
Incentive compensation & employee benefits 690 455 235
Agency & other professional service fees 228 214 14
Communication & data services 145 140 5
Occupancy, net 111 120 (9)
Furniture & equipment 124 122 2
Travel & entertainment 66 67 (1)
Provision for policyholder benefits 216 202 14
Other 183 172 11
Provision for severance-related costs - 50 (50)
Total noninterest expenses 2,395 2,140 255
Income before income taxes 663 131 532
Income taxes 198 42 156
NET INCOME $ 465 $ 89 $376
NET INCOME APPLICABLE TO COMMON STOCK $ 428 $ 53 $375
Cash dividends declared per common share $3.00 $3.00 $-
EARNINGS PER COMMON SHARE:
PRIMARY $5.19 $.66 $4.53
FULLY DILUTED $5.16 $.65 $4.51
<FN>
Certain prior period amounts have been reclassified to conform to the
current presentation.
</TABLE>
<PAGE> 4
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in millions, except par value)
<TABLE>
<CAPTION>
September 30,December 31,
1996* 1995
<S> <C> <C>
ASSETS
Cash and due from banks $ 825 $ 2,337
Interest-bearing deposits with banks 4,100 2,023
Federal funds sold 856 854
Securities purchased under resale
agreements 22,073 13,206
Securities borrowed 14,926 10,951
Trading assets:
Government securities 16,075 20,704
Corporate debt securities 8,678 5,648
Equity securities 5,585 5,098
Swaps, options and other derivatives 10,363 10,555
Other trading assets 7,056 5,888
Total trading assets 47,757 47,893
Securities available for sale 7,461 6,283
Loans 15,264 12,633
Allowance for credit losses (967) (992)
Accounts receivable and accrued interest 3,417 4,220
Other assets 5,135 4,594
Total $120,847 $104,002
LIABILITIES
Noninterest-bearing deposits
Domestic offices $ 2,552 $ 2,687
Foreign offices 647 605
Interest-bearing deposits
Domestic offices 7,401 5,402
Foreign offices 18,072 17,014
Total deposits 28,672 25,708
Trading liabilities:
Securities sold, not yet purchased
Government securities 11,020 11,092
Equity securities 3,729 3,262
Other trading liabilities 389 473
Swaps, options and other derivatives 10,266 11,264
Total trading liabilities 25,404 26,091
Securities sold under repurchase agreements 23,989 15,247
Other short-term borrowings 18,799 15,761
Accounts payable and accrued expenses 5,252 3,931
Other liabilities 2,650 2,736
Long-term debt 10,507 9,294
Total liabilities 115,273 98,768
PREFERRED STOCK OF SUBSIDIARY 250 250
STOCKHOLDERS' EQUITY
Preferred stock 816 865
Common stock, $1 par value
Authorized, 300,000,000 shares
Issued, 83,678,973 shares 84 84
Capital surplus 1,319 1,302
Retained earnings 3,450 3,316
Common stock in treasury, at cost:
1996, 2,193,093 shares;
1995, 4,602,855 shares (173) (336)
Other stockholders' equity (172) (247)
Total stockholders' equity 5,324 4,984
Total $120,847 $104,002
<FN>
* Unaudited
Certain prior period amounts have been reclassified to conform to the
current presentation.
</TABLE>
<PAGE> 5
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in millions)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996 1995
<S> <C> <C>
PREFERRED STOCK
Balance, January 1 $ 865 $ 395
Preferred stock issued 1 470
Preferred stock repurchased (50) -
Balance, September 30 816 865
COMMON STOCK
Balance, January 1 and September 30 84 84
CAPITAL SURPLUS
Balance, January 1 1,302 1,317
Preferred stock issuance and conversion costs - (17)
Common stock distributed under employee
benefit plans 11 1
Preferred stock repurchased 6 -
Balance, September 30 1,319 1,301
RETAINED EARNINGS
Balance, January 1 3,316 3,494
Net income 465 89
Cash dividends declared
Preferred stock (44) (33)
Common stock (242) (235)
Treasury stock distributed under employee benefit plans (38) (20)
Treasury stock associated with acquisition (7) -
Balance, September 30 3,450 3,295
COMMON STOCK IN TREASURY, AT COST
Balance, January 1 (336) (416)
Purchases of stock (250) (13)
Restricted stock granted, net 35 9
Treasury stock distributed under employee benefit plans 168 47
Treasury stock associated with acquisition 210 -
Balance, September 30 (173) (373)
COMMON STOCK ISSUABLE - STOCK AWARDS
Balance, January 1 233 160
Deferred stock awards granted, net 67 34
Deferred stock distributed (1) (16)
Balance, September 30 299 178
DEFERRED COMPENSATION - STOCK AWARDS
Balance, January 1 (151) (63)
Deferred stock awards granted, net (66) (34)
Restricted stock granted, net (36) (7)
Amortization of deferred compensation, net 121 42
Balance, September 30 (132) (62)
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, January 1 (348) (336)
Translation adjustments (40) (9)
Income taxes applicable to translation adjustments 24 (4)
Balance, September 30 (364) (349)
SECURITIES VALUATION ALLOWANCE
Balance, January 1 19 69
Change in unrealized net gains, after applicable
income taxes and minority interest 6 53
Balance, September 30 25 122
TOTAL STOCKHOLDERS' EQUITY, SEPTEMBER 30 $5,324 $5,061
</TABLE>
<PAGE> 6
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 465 $ 89
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses 5 21
Provision for severance-related costs - 50
Provision for policyholder benefits 216 202
Deferred income taxes 168 (141)
Depreciation and amortization of premises
and equipment 107 101
Other, net (90) (62)
Earnings adjusted for noncash charges and credits 871 260
Net change in:
Trading assets (429) (3,610)
Trading liabilities (865) 4,302
Receivables and payables from securities
transactions 2,366 514
Other operating assets and liabilities, net (962) (518)
Securities available for sale gains (51) (29)
Net cash provided by operating activities 930 919
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits with banks (2,118) 1,618
Federal funds sold (2) 2,515
Securities purchased under resale agreements (8,766) (4,632)
Securities borrowed (3,975) (2,700)
Loans (2,423) (426)
Securities available for sale:
Purchases (4,161) (3,034)
Maturities and other redemptions 2,327 2,413
Sales 501 1,436
Acquisitions of premises and equipment (135) (94)
Other, net 144 (88)
Net cash used in investing activities (18,608) (2,992)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in:
Deposits 2,860 (673)
Securities sold under repurchase agreements 9,114 1,946
Other short-term borrowings 2,911 (1,498)
Issuances of long-term debt 2,553 3,210
Repayments of long-term debt (856) (1,137)
Issuances of preferred stock - 221
Purchases of preferred stock (44) -
Purchases of treasury stock (250) (13)
Cash dividends paid (283) (268)
Other, net 139 21
Net cash provided by financing activities 16,144 1,809
Net effect of exchange rate changes on cash 22 (6)
NET DECREASE IN CASH AND DUE FROM BANKS (1,512) (270)
Cash and due from banks, beginning of year 2,337 1,985
Cash and due from banks, end of period $ 825 $ 1,715
Interest paid $4,049 $3,618
Income taxes paid, net $135 $191
Noncash investing activities $269 $92
Noncash financing activities:
Conversion of debt to preferred stock $1 $245
<FN>
Certain prior period amounts have been reclassified to conform to the
current presentation.
</TABLE>
<PAGE> 7
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF NET INTEREST REVENUE
(in millions)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST REVENUE
Interest-bearing deposits with banks $ 58 $ 45 $ 141 $ 154
Federal funds sold 33 12 92 68
Securities purchased under
resale agreements 371 189 840 547
Securities borrowed 224 204 690 574
Trading assets 595 778 1,884 2,108
Securities available for sale
Taxable 115 82 315 252
Exempt from federal income taxes 4 13 16 44
Loans 269 233 740 682
Total interest revenue 1,669 1,556 4,718 4,429
INTEREST EXPENSE
Deposits
In domestic offices 95 93 267 284
In foreign offices 244 236 707 714
Trading liabilities 202 275 663 725
Securities sold under repurchase agreements 448 312 1,156 858
Other short-term borrowings 291 315 799 920
Long-term debt 141 121 422 320
Total interest expense 1,421 1,352 4,014 3,821
NET INTEREST REVENUE $ 248 $ 204 $ 704 $ 608
<FN>
Certain prior period amounts have been reclassified to conform to the
current presentation.
</TABLE>
<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 $176
million for the quarter ended September 30, 1996, or $1.99 primary earnings
per share. In the third quarter of 1995, the Corporation earned $155
million, or $1.72 primary earnings per share.
For the first nine months of 1996, the Corporation earned $465
million, or $5.19 primary earnings per share. The Corporation earned $89
million, or $.66 primary earnings per share in the comparable period of
1995.
ORGANIZATIONAL UNITS RESULTS
Organizational Unit business results are determined based on the
Corporation's internal management accounting process, which allocates
revenue and expenses among the Organizational Units. Because the
Corporation's business is complex in nature and its operations are
integrated, it is impractical to segregate respective contributions of the
Organizational Units with precision. As a result, estimates and subjective
judgments have been made to apportion revenue and expense items. The
internal management accounting process, unlike financial accounting in
accordance with generally accepted accounting principles, is based on the
way Bankers Trust's businesses are managed and is not necessarily
comparable with similar information disclosed by other financial
institutions. In order to provide comparability from one period to the
next, the Corporation will restate this analysis to conform with material
changes in the allocation process and/or significant changes in
organizational structure.
The following tables analyze the results by Organizational Units:
<TABLE>
<CAPTION>
Total Non- Pretax Net
Three Months Ended September 30, 1996 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $ 231 $122 $109 $ 77
Risk Management Services 84 80 4 3
Trading & Sales 107 65 42 29
Investment Management 76 70 6 4
Client Processing Services 200 165 35 25
Australia/New Zealand 138 77 61 43
Asia 30 24 6 5
Latin America 123 94 29 20
Corporate/Other 70 112 (42) (30)
Total $1,059 $809 $250 $176
</TABLE>
<PAGE> 9
ORGANIZATIONAL UNITS RESULTS (continued)
<TABLE>
<CAPTION>
Total Non- Pretax Net
Three Months Ended September 30, 1995 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $184 $ 83 $101 $ 70
Risk Management Services 107 94 13 9
Trading & Sales 124 70 54 38
Investment Management 64 68 (4) (3)
Client Processing Services 177 140 37 25
Australia/New Zealand 97 65 32 22
Asia 7 26 (19) (14)
Latin America 123 119 4 3
Corporate/Other 69 63 6 5
Total $952 $728 $224 $155
</TABLE>
<TABLE>
<CAPTION>
Total Non- Pretax Net
Nine Months Ended September 30, 1996 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $ 709 $ 335 $ 374 $ 263
Risk Management Services 206 233 (27) (18)
Trading & Sales 292 191 101 70
Investment Management 219 206 13 9
Client Processing Services 590 488 102 72
Australia/New Zealand 350 211 139 98
Asia 98 75 23 18
Latin America 425 318 107 75
Corporate/Other 169 338 (169) (122)
Total $3,058 $2,395 $ 663 $ 465
</TABLE>
<TABLE>
<CAPTION>
Total Non- Pretax Net
Nine Months Ended September 30, 1995 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $ 450 $ 210 $ 240 $ 168
Risk Management Services 198 242 (44) (30)
Trading & Sales 262 180 82 57
Investment Management 200 206 (6) (5)
Client Processing Services 530 426 104 72
Australia/New Zealand 291 191 100 69
Asia 59 72 (13) (9)
Latin America 168 323 (155) (109)
Corporate/Other 113 290 (177) (124)
Total $2,271 $2,140 $ 131 $ 89
</TABLE>
<PAGE> 10
ORGANIZATIONAL UNITS RESULTS (continued)
The Investment Banking business produced net income of $77 million in
the third quarter of 1996, compared with $70 million in the third quarter
of the previous year. Net income for the first nine months of 1996
increased $95 million to $263 million. Higher revenue from corporate
finance, private equity investments and real estate investment banking
accounted for most of this increase from the first nine months of 1995.
Risk Management Services produced net income of $3 million in the
third quarter of 1996, down $6 million from the third quarter of 1995. For
the first nine months of 1996 this unit incurred a net loss of $18 million
versus a net loss of $30 million for the same period in 1995.
Net income from the Trading & Sales business, at $29 million, was down
$9 million from the third quarter of 1995. Net income for the first nine
months of 1996 was $70 million versus $57 million for the comparable period
in 1995. The year-over-year improvement was primarily due to strong
results from arbitrage trading.
The Corporation's Investment Management business, which for reporting
purposes does not include investment management activities in Australia/NZ,
reported net income of $4 million for the current quarter up $7 million
from the 1995 comparable period. Net income for the first nine months of
1996 was $9 million compared to a net loss of $5 million in the first nine
months of 1995. At September 30, 1996, assets under management in this
organizational unit were approximately $193 billion, compared to $177
billion at September 30, 1995.
Client Processing Services contributed $25 million of net income in
the third quarter of 1996, in line with the third quarter of 1995. Net
income for the first nine months of 1996 was $72 million, even with the
first nine months of 1995. Total revenue for the first nine months of 1996
increased 11 percent from the comparable 1995 period, offset by higher
expenses, primarily related to technology spending.
Net income of the Australia/NZ business was $43 million in the third
quarter of 1996, up $21 million from the third quarter of 1995. Virtually
all major business lines in Australia/NZ improved, led by the Financial
Markets Group. Net income for the first nine months of 1996 increased to
$98 million from $69 million recorded for the same period in 1995. At
September 30, 1996, assets under management in Australia/NZ's investment
management business were approximately $25 billion, compared to $22 billion
at September 30, 1995.
Asia net income was $5 million in the third quarter of 1996, up $19
million from the third quarter of 1995. The increase from the third
quarter of 1995 was primarily due to improved risk management results. Net
income was $18 million for the first nine months of 1996 compared to a net
loss of $9 million for the first nine months of 1995.
Latin America net income was $20 million in the third quarter of 1996,
up $17 million from the third quarter of 1995. Net income for the first
nine months of 1996 was $75 million compared to a net loss of $109 million
in the comparable period of 1995. The loss incurred in the first nine
<PAGE> 11
ORGANIZATIONAL UNITS RESULTS (continued)
months of 1995 was the result of certain client risk management and trading
positions that were affected by extreme volatility and illiquidity in Latin
American securities markets after the Mexican peso devaluation.
Corporate/Other, which includes unallocated portions of corporate
functions, produced a net loss of $30 million in the third quarter of 1996
compared with net income of $5 million in the third quarter of 1995. The
current quarter's results included a net gain after-tax of $18 million on
the sale of Golden American Life Insurance Company, an indirect wholly-
owned subsidiary of the Corporation acquired in satisfaction of debt in
1992. For the first nine months of 1996 the net loss was $122 million
compared with a net loss of $124 million for the first nine months of 1995.
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>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET INTEREST REVENUE (in millions)
Book basis $248 $204 $704 $608
Tax equivalent adjustment 4 11 12 35
Fully taxable basis $252 $215 $716 $643
AVERAGE BALANCES (in millions)
Interest-earning assets $98,184 $82,288 $91,612 $80,651
Interest-bearing liabilities 91,015 77,668 86,892 77,002
Earning assets financed by
noninterest-bearing funds $ 7,169 $ 4,620 $ 4,720 $ 3,649
AVERAGE RATES (fully taxable basis)
Yield on interest-earning assets 6.78% 7.56% 6.90% 7.40%
Cost of interest-bearing liabilities 6.21 6.91 6.17 6.63
Interest rate spread .57 .65 .73 .77
Contribution of noninterest-bearing
funds .45 .39 .31 .30
Net interest margin 1.02% 1.04% 1.04% 1.07%
</TABLE>
Net interest revenue for the third quarter of 1996 totaled $248
million, up $44 million, or 22 percent, from the third quarter of 1995.
The $44 million increase in net interest revenue was primarily due to a $51
million increase in trading-related net interest revenue, which totaled $71
million for the third quarter of 1996. Nontrading-related net interest
revenue which is considered to be historically a more stable component of
overall net interest revenue, totaled $177 million for the third quarter of
1996 versus $184 million for the comparable period in 1995. Net interest
revenue was $704 for the first nine months of 1996, up $96 million, or 16
<PAGE> 12
REVENUE (continued)
percent from the first nine months of 1995. Nontrading-related net
interest revenue totaled $539 million for the first nine months of 1996
versus $530 for the comparable period in 1995.
A significant portion of the Firm's trading and risk management
activities involve positions in interest rate instruments and related
derivatives. The revenue from these activities can periodically shift
between trading and net interest, depending on a variety of factors,
including risk management strategies. Therefore, the Corporation views
trading revenue and trading-related net interest revenue together.
Combined trading revenue and trading-related net interest revenue for
the third quarter of 1996 totaled $290 million, up $13 million from the
third quarter of 1995. Combined trading revenue and trading-related net
interest revenue for the first nine months of 1996 was $777 million, up
$441 million from the $336 million reported in the first nine months of
1995.
The table below quantifies the Corporation's trading revenue and
trading-related net interest revenue by major category of market risk.
These categories are based on management's view of the predominant
underlying risk exposure of each of the Firm's trading positions.
<TABLE>
<CAPTION>
Trading-
Related
Net
Trading Interest
(in millions) Revenue Revenue Total
<S> <C> <C> <C>
Quarter ended September 30, 1996
Interest rate risk $121 $ 83 $204
Foreign exchange risk 32 - 32
Equity and commodity risk 66 (12) 54
Total $219 $ 71 $290
Quarter ended September 30, 1995
Interest rate risk $ 89 $ 27 $116
Foreign exchange risk 68 - 68
Equity and commodity risk 100 (7) 93
Total $257 $ 20 $277
Nine Months ended September 30, 1996
Interest rate risk $354 $194 $548
Foreign exchange risk 112 - 112
Equity and commodity risk 146 (29) 117
Total $612 $165 $777
Nine Months ended September 30, 1995
Interest rate risk $ 42 $117 $159
Foreign exchange risk 30 - 30
Equity and commodity risk 186 (39) 147
Total $258 $ 78 $336
</TABLE>
<PAGE> 13
REVENUE (continued)
Third Quarter 1996 vs. Third Quarter 1995
Interest Rate Risk - The increase in combined trading and trading-
related net interest revenue was primarily due to a strong interest rate
trading environment in the third quarter of 1996 as a result of the general
rally in rates and a tightening to a historically low level of Corporate to
Treasury spreads. Also contributing to the increase was strong performance
from the Firm's activities in Australia.
Foreign Exchange Risk - Foreign exchange risk revenue declined from
the third quarter of 1995, as reduced spreads negatively affected this
category. This decline was partially offset by improved performance in
Latin American and Asian foreign exchange markets.
Equity and Commodity Risk - Total trading and trading-related net
interest revenue declined compared to the same period last year due to a
decline in equity related products in the Risk Management Services, Trading
& Sales and Investment Banking Organizational Units.
Nine Months 1996 vs. Nine Months 1995
Interest Rate Risk - The increase in revenue was principally due to a
rebound in the Firm's activities in Latin America as 1995 was characterized
by heightened volatility in interest rates coupled with liquidity problems
in the emerging markets of Latin America.
Foreign Exchange Risk - Trading revenue improved compared to the same
period last year due to improved performance in Australian, Asian and Latin
American foreign exchange markets. The first half of 1995 was affected by
global volatility in foreign exchange markets during which the dollar fell
to record lows against the Japanese Yen and German Mark.
Equity and Commodity Risk - Total trading and trading related net
interest revenue declined compared to the same period last year due to
losses incurred in the commodity derivatives books when copper prices
dropped sharply.
<PAGE> 14
REVENUE (continued)
Shown below is a comparison of the components of noninterest revenue
(excluding trading).
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, Increase September 30, Increase
(in millions) 1996 1995 (Decrease) 1996 1995 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Fiduciary & funds management
revenue $196 $174 $ 22 $ 577 $ 511 $ 66
Corporate finance fees 119 74 45 341 273 68
Other fees and commissions:
Service charges on deposit
accounts 16 18 (2) 49 54 (5)
Transaction processing
fees 38 34 4 112 103 9
Other 32 26 6 94 78 16
Total other fees
& commissions 86 78 8 255 235 20
Net revenue from equity
investment transactions 74 85 (11) 167 124 43
Securities available for sale
gains 11 10 1 51 29 22
Insurance premiums 52 64 (12) 177 176 1
Other 54 13 41 179 78 101
Total noninterest revenue
(excluding trading) $592 $498 $ 94 $1,747 $1,426 $321
</TABLE>
<PAGE> 15
REVENUE (continued)
Third Quarter 1996 vs. Third Quarter 1995
Fiduciary and funds management revenue totaled $196 million for the
third quarter of 1996, up $22 million, or 13 percent, from the comparable
period last year. Virtually all major activities within this category
contributed to the year-over-year increase.
Corporate finance fees of $119 million increased by $45 million, or 61
percent, from the same period last year, mostly due to higher revenue from
financial advisory, commercial banking and merger and acquisition
activities. Other fees and commissions totaled $86 million, an increase of
$8 million, or 10 percent, compared with last year's comparable period.
Net revenue from equity investment transactions was $74 million, down
$11 million from the prior year's comparable period. The third quarter of
1995 included a $62 million pre-tax gain on the sale of a portion of the
Corporation's merchant banking investment in Northwest Airlines
Corporation.
All other noninterest revenue totaled $117 million, up $30 million
from the prior year's third quarter. Contributing to this increase was a
gain on the sale of Golden American Life Insurance Company, an indirect
wholly-owned subsidiary of the Corporation acquired in satisfaction of debt
in 1992.
Nine Months Ended 1996 vs. Nine Months Ended 1995
Fiduciary and funds management fees of $577 million, increased $66
million, or 13 percent, from the first nine months of 1995. Virtually all
major activities within this category contributed to the increased
revenues.
Corporate finance fees totaled $341 million, an increase of $68
million, or 25 percent from the first nine months of 1995. Increased
revenue was due to securities underwriting, commercial banking and
financial advisory activities. Other fees and commissions totaled $255
million, up $20 million, or 9 percent compared to last year's first nine
months.
Net revenue from equity investment transactions was $167 million, up
$43 million from the first nine months of 1995. This increase was
attributable primarily to activities within the Corporate Finance and
Private Equity Investment Units of Investment Banking.
All other noninterest revenue totaled $407 million, up $124 million
from the first nine months of 1995. Contributing to this increase were
gains on the sale of Compensa, the smaller of the Corporation's two Chilean
insurance subsidiaries, and on the sale of Golden American Life Insurance
Company.
<PAGE> 16
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
The provision for credit losses is dependent upon management's
evaluation as to the amount needed to maintain the allowance for credit
losses at a level considered appropriate in relation to the risk of losses
inherent in the portfolio.
No provision for credit losses was required for the third quarter of
1996 compared with $7 million for the prior year's third quarter. Net
charge-offs for the third quarter were $5 million, compared with $218
million a year ago. The current quarter's net charge-offs included $16
million of net charge-offs related to settlements of old leveraged
derivative transactions.
The provision for credit losses and the other changes in the allowance
for credit losses are shown below (in millions).
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
Allowance for credit losses 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Balance, beginning of period $972 $1,243 $992 $1,252
Net charge-offs
Charge-offs 19 223 68 270
Recoveries 14 5 38 29
Total net charge-offs* 5 218 30 241
Provision for credit losses - 7 5 21
Balance, end of period $967 $1,032 $967 $1,032
*Components:
Secured by real estate $(1) $ 9 $ - $ 12
Real estate related (1) - 3 2
Highly leveraged (5) 6 18 28
Other 14 203 15 207
Refinancing country (2) - (6) (8)
Total $ 5 $218 $30 $241
</TABLE>
The allowance for credit losses, at $967 million at September 30,
1996, was down $5 million from its level at June 30, 1996. The allowance
was equal to 198 percent, 170 percent, and 133 percent of total cash basis
loans at September 30, 1996, June 30, 1996, and December 31, 1995,
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 entire portfolio.
<PAGE> 17
PROVISION AND ALLOWANCE FOR CREDIT LOSSES (continued)
The recorded investment in loans that was considered to be impaired
under SFAS 114 was $577 million and $844 million which consisted of total
cash basis loans and renegotiated loans at September 30, 1996 and December
31, 1995, respectively. Included in these amounts were $246 million and
$458 million of loans for which the related valuation allowance was $56
million and $90 million at these dates, respectively.
EXPENSES
Third Quarter 1996 vs. Third Quarter 1995
Total noninterest expenses of $809 million increased by $81 million,
or 11 percent, from the third quarter of 1995. Incentive compensation and
employee benefits increased $41 million while salaries expense increased
$33 million primarily due to annual pay increases, as well as an increase
in the average number of employees. All other expenses totaled $352
million for the quarter, up $7 million, or 2 percent, from last year's
third quarter.
Nine Months 1996 vs. Nine Months 1995
Total noninterest expenses of $2.395 billion for the first nine months
of 1996 increased by $255 million, or 12 percent from the first nine months
of 1995. Incentive compensation and employee benefits expense increased
$235 million, mostly due to higher bonus expense reflecting improved
earnings. Salaries expense increased $34 million in the first nine months
of 1996 primarily due to higher average salaries as well as an increase in
the average number of employees. All other expenses totaled $1.073 billion
for the first nine months of 1996, down $14 million, or 1 percent from last
year's comparable period. The first nine months of 1995 included a $50
million pre-tax provision for severance-related costs.
INCOME TAXES
Income tax expense for the third quarter of 1996 amounted to $74
million, compared with $69 million for the third quarter of 1995. For the
first nine months of 1996, income tax expense was $198 million compared
with $42 million for the first nine months of 1995. The effective tax rate
was 30 percent for both the quarter and nine months ended September 30,
1996 compared with 31 percent and 32 percent for the quarter and nine
months ended September 30, 1995.
<PAGE> 18
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 this amount 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 month and nine month
periods ended September 30, 1996 and 1995 did the Corporation have
outstanding any securities which were convertible into the Parent Company's
common stock.
Overall earnings per share of $1.99 included partially offsetting
items that produced a net increase of $0.02 per share. During the quarter
the Corporation purchased $50 million of its Series Q and Series R
preferred stock at a discount, which is reflected as an increase in
earnings per share of $0.08. Offsetting this increase is a reduction in
earnings per share of approximately $0.06 due to a net increase of common
shares primarily issued in connection with the purchase of Wolfensohn.
During the quarter the Corporation announced its authorization to
repurchase up to three million shares of its common stock, in addition to
its previously announced program to repurchase shares issued under employee
stock option and award plans.
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 Nine MonthsEnded
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net income applicable to common stock $168 $139 $428 $53
Average number of common shares
outstanding 79.731 78.423 78.356 78.362
Average common and common equivalent shares
outstanding - primary 84.442 81.039 82.416 80.788
Average common and common equivalent shares
outstanding assuming full dilution 84.885 81.403 82.935 80.987
</TABLE>
<PAGE> 19
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)
3rd Qtr 2nd Qtr 4th Qtr
1996 1996 1995
<S> <C> <C> <C>
ASSETS
Interest-earning
Interest-bearing deposits with banks $ 3,301 $ 2,114 $ 3,624
Federal funds sold 2,389 2,318 2,387
Securities purchased under resale
agreements 26,342 21,636 15,167
Securities borrowed 14,847 15,820 13,817
Trading assets 30,687 29,376 31,926
Securities available for sale
Taxable 5,730 5,480 5,206
Exempt from federal income taxes 1,075 1,201 1,365
Total securities available for sale 6,805 6,681 6,571
Loans
In domestic offices 7,192 7,106 7,199
In foreign offices 6,621 5,951 5,624
Total loans 13,813 13,057 12,823
Total interest-earning assets 98,184 91,002 86,315
Noninterest-earning
Cash and due from banks 1,233 1,210 1,972
Noninterest-earning trading assets 16,180 17,425 17,858
All other assets 8,773 9,104 9,736
Allowance for credit losses (972) (989) (1,028)
Total $123,398 $117,752 $114,853
LIABILITIES
Interest-bearing
Interest-bearing deposits
In domestic offices $ 6,927 $ 6,039 $ 5,788
In foreign offices 16,852 15,861 18,404
Total interest-bearing deposits 23,779 21,900 24,192
Trading liabilities 11,744 12,178 12,599
Securities sold under repurchase agreements 27,765 28,554 22,680
Other short-term borrowings 17,156 13,677 15,960
Long-term debt 10,571 10,393 8,904
Total interest-bearing liabilities 91,015 86,702 84,335
Noninterest-bearing
Noninterest-bearing deposits 3,142 3,034 3,606
Noninterest-bearing trading liabilities 15,576 15,118 15,392
All other liabilities 8,106 7,526 6,240
Total liabilities 117,839 112,380 109,573
PREFERRED STOCK OF SUBSIDIARY 250 250 250
STOCKHOLDERS' EQUITY
Preferred stock 864 866 865
Common stockholders' equity 4,445 4,256 4,165
Total stockholders' equity 5,309 5,122 5,030
Total $123,398 $117,752 $114,853
<FN>
The condensed average balance sheets are presented on a slightly different
basis than the balance sheets presented in the financial statements section
of this report, in that the various categories of interest-earning assets
and interest-bearing liabilities exclude certain noninterest-
earning/bearing components included in the balance sheet captions. These
components, excluding noninterest-earning/bearing trading
assets/liabilities, are included in "all other assets" and "all other
liabilities" in the condensed average balance sheets.
Certain prior period amounts have been reclassified to conform to the
current presentation.
</TABLE>
<PAGE> 20
BALANCE SHEET ANALYSIS (continued)
Third Quarter 1996 vs. Second Quarter 1996
The Corporation's average total assets amounted to $123.4 billion for
the third quarter of 1996, an increase of $5.6 billion, or 5 percent, from
the second quarter of 1996. Average interest-earning assets increased $7.2
billion, or 8 percent, and the proportion of interest-earning assets to
total assets increased from 77 percent to 80 percent. The increase in
interest-earning assets was primarily due to increases in securities
purchased under resale agreements (up $4.7 billion, or 22 percent), trading
assets (up $1.3 billion or 4 percent) and interest-bearing deposits with
banks (up $1.2 billion, or 56 percent), offset in part by a decrease in
securities borrowed (down $973 million, or 6 percent). Interest-earning
trading assets, as a percentage of total assets remained constant at 25
percent. Noninterest-earning trading assets declined $1.2 billion, or 7
percent, from the second quarter of 1996.
Average total liabilities increased $5.5 billion, or 5 percent from
the second quarter of 1996. Within interest-bearing liabilities, increases
in other short-term borrowings (up $3.5 billion, or 25 percent and total
interest-bearing deposits (up $1.9 billion, or 9 percent) were offset in
part by a decrease in securities sold under repurchase agreements (down
$789 million, or 3 percent). Total short-term borrowings (securities sold
under repurchase agreements and other short-term borrowings) as a
percentage of total interest-bearing liabilities remained constant at 49
percent.
Third Quarter 1996 vs. Fourth Quarter 1995
The Corporation's average total assets for the third quarter of 1996
increased $8.5 billion, or 7 percent from the fourth quarter of 1995.
Average interest-earning assets increased $11.9 billion, or 14 percent, and
the proportion of interest-earning assets to total assets increased from 75
percent to 80 percent. The increase in interest-earning assets was
primarily due to increases in securities purchased under resale agreements
(up $11.2 billion, or 74 percent), securities borrowed (up $1.0 billion, or
7 percent) and total loans (up $1.0 billion or 8 percent), offset in part
by a decrease in trading assets (down $1.2 billion, or 4 percent).
Interest-earning trading assets, as a percentage of total assets, declined
from 28 percent to 25 percent. Noninterest-earning trading assets declined
$1.7 billion, or 9 percent, from the fourth quarter of 1995.
Average total liabilities increased $8.3 billion, or 8 percent from
the fourth quarter of 1995. Within interest-bearing liabilities, increases
in securities sold under repurchase agreements (up $5.1 billion, or 22
percent, long-term debt (up $1.7 billion or 19 percent) and other short-
term borrowings (up $1.2 billion, or 7 percent) were offset in part by a
decrease in trading liabilities (down $855 million, or 7 percent). Total
short-term borrowings (securities sold under repurchase agreements and
other short-term borrowings) as a percentage of total interest-bearing
liabilities increased from 46 percent to 49 percent.
<PAGE> 21
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>
September 30, June 30,December 31,
1996 1996 1995
<S> <C> <C> <C>
Fair value $7,461 $6,851 $6,283
Amortized cost 7,382 6,818 6,204
Excess of fair value over
amortized cost * $ 79 $ 33 $ 79
* Components:
Unrealized gains $158 $113 $ 182
Unrealized losses (79) (80) (103)
$ 79 $ 33 $ 79
</TABLE>
Long-term Debt
During the third quarter of 1996, the Corporation obtained $535
million of cash proceeds from the issuances of long-term debt and repaid
$493 million of long-term debt. The larger of these debt issuances were as
follows (in millions):
<TABLE>
<CAPTION>
Face Amount
<S> <C>
Parent Company
6 5/8% Notes due July 30, 1999 $250
BT Securities Corporation
Senior Subordinated Floating Rate Notes due 1999 $200
</TABLE>
<PAGE> 22
TRADING DERIVATIVES
The Corporation actively manages, in accordance with the Corporation's
risk management policies, trading positions in a variety of derivative
books. Many of the Corporation's trading positions are established as a
result of providing derivative products to meet customers' demands. To
anticipate customer demand for such transactions, the Corporation also
carries an inventory of capital market instruments and maintains its access
to market liquidity by quoting bid and offer prices to, and trading with,
other market makers. These two activities are essential to provide
customers with capital market products at competitive prices. All trading
positions are reported at fair value and changes in fair values are
reflected in trading revenue as they occur.
The following tables reflect the gross fair values and balance sheet
amounts of trading derivative financial instruments:
<TABLE>
<CAPTION>
At September 30, Average During
1996 3rd Qtr. 1996
(Liabi- (Liabi-
(in millions) Assets lities) Assets lities)
<S> <C> <C> <C> <C>
OTC Financial Instruments
Interest Rate and Currency
Swap Contracts $ 15,131 $(14,009)$ 13,689 $(13,198)
Interest Rate Contracts
Forwards 54 (44) 48 (46)
Options purchased 1,100 1,001
Options written (1,258) (1,287)
Foreign Exchange Rate Contracts
Spot and Forwards 7,538 (8,566) 6,665 (8,025)
Options purchased 978 854
Options written (1,013) (943)
Equity-related contracts 2,185 (2,063) 2,000 (2,257)
Commodity-related and other contracts 588 (632) 517 (596)
Exchange-Traded Options
Interest Rate 2 (6) 4 (9)
Foreign exchange - - 1 -
Equity 251 (139) 163 (72)
Total Gross Fair Values 27,827 (27,730) 24,942 (26,433)
Impact of Netting Agreements (17,464) 17,464 (15,160) 15,160
$ 10,363(1) $9,782
$(10,266)(1) $(11,273)
<FN>
(1) As reflected on the balance sheet in "Trading Assets" and "Trading
Liabilities."
</TABLE>
<PAGE> 23
TRADING DERIVATIVES (continued)
<TABLE>
<CAPTION>
At December 31, Average During
1995 4th Qtr. 1995
(Liabi- (Liabi-
(in millions) Assets lities) Assets lities)
<S> <C> <C> <C> <C>
OTC Financial Instruments
Interest Rate and Currency
Swap Contracts $ 15,858 $(15,471) $ 16,260 $(14,960)
Interest Rate Contracts
Forwards 83 (81) 127 (104)
Options purchased 1,426 1,299
Options written (1,312) (1,729)
Foreign Exchange Rate Contracts
Spot and Forwards 7,931 (8,937) 9,473 (10,236)
Options purchased 999 1,213
Options written (941) (1,148)
Equity-related contracts 2,011 (2,359) 1,838 (2,093)
Commodity-related and other contracts 541 (531) 542 (468)
Exchange-Traded Options
Interest Rate 33 (16) 32 (39)
Equity 137 (80) 158 (105)
Total Gross Fair Values 29,019 (29,728) 30,942 (30,882)
Impact of Netting Agreements (18,464) 18,464 (19,152) 19,152
$ 10,555(1) $ 11,790
$(11,264)(1) $(11,730)
<FN>
(1) As reflected on the balance sheet in "Trading Assets" and "Trading
Liabilities."
</TABLE>
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 certain 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. Revenue or expense pertaining to
management of interest rate exposure is predominantly recognized over the
life of the contract as an adjustment to interest revenue or expense.
Total net end-user derivative unrealized gains were $17 million and
$212 million at September 30, 1996 and December 31, 1995, respectively.
The $195 million decrease during the first nine months of 1996 was
primarily due to increases in long-term interest rates.
<PAGE> 24
END-USER DERIVATIVES (continued)
The following tables provide the gross unrealized gains and losses for
end-user derivatives. Gross unrealized gains and losses for hedges of
securities available for sale are recognized in the financial statements
with the offset as an adjustment to securities valuation allowance in
stockholders' equity. Gross unrealized gains and losses for hedges of
loans, other assets, interest-bearing deposits, other short-term
borrowings, long-term debt, and net investments in foreign subsidiaries are
not yet recognized in the financial statements.
<TABLE>
<CAPTION>
Other Net invest-
short- ments in
Securities Interest- term Long- foreign
(in millions) available Other bearing borrow- term subsi-
Sept. 30, 1996 for sale Loans assets deposits ings debt diaries Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps
Pay Variable
Unrealized Gain $1 $ - $- $ 42 $ - $205 $- $ 248
Unrealized
(Loss) - (5) - (39) (9) (89) - (142)
Pay Variable Net 1 (5) - 3 (9) 116 - 106
Pay Fixed
Unrealized Gain 5 - - 17 - 15 - 37
Unrealized
(Loss) (42) (9) - (45) - (4) - (100)
Pay Fixed Net (37) (9) - (28) - 11 - (63)
Total Unrealized
Gain 6 - - 59 - 220 - 285
Total Unrealized
(Loss) (42) (14) - (84) (9) (93) - (242)
Total Net $(36) $(14) $- $(25) $(9) $127 $- $ 43
Forward Rate Agreements
Unrealized Gain $- $- $- $ 1 $- $- $- $ 1
Unrealized (Loss) - - - (1) - - - (1)
Net $- $- $- $ - $- $- $- $ -
Currency Swaps and Forwards
Unrealized Gain $- $- $1 $23 $ - $ 21 $ 23 $ 68
Unrealized (Loss) - - - (3) (2) (48) (34) (87)
Net $- $- $1 $20 $(2) $(27) $(11) $(19)
Other Contracts (1)
Unrealized Gain $ - $- $ - $- $- $- $- $ -
Unrealized
(Loss) (4) - (3) - - - - (7)
Net $(4) $- $(3) $- $- $- $- $(7)
Total Unrealized
Gain $ 6 $ - $ 1 $ 83 $ - $ 241 $ 23 $ 354
Total Unrealized
(Loss) (46) (14) (3) (88) (11) (141) (34) (337)
Total Net $(40) $(14) $(2) $ (5) $(11)$ 100 $(11)$ 17
<FN>
(1) Other contracts are principally equity swaps and collars.
</TABLE>
<PAGE> 25
END-USER DERIVATIVES (continued)
<TABLE>
<CAPTION>
Other Net invest-
short- ments in
Securities Interest- term Long- foreign
(in millions) available Other bearing borrow term subsi-
Dec. 31, 1995 for sale Loans assets deposits ings debt diaries Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps
Pay Variable
Unrealized Gain$ - $ - $- $132 $ 4 $339 $- $ 475
Unrealized
(Loss) - (5) - (7) (1) (24) - (37)
Pay Variable Net - (5) - 125 3 315 - 438
Pay Fixed
Unrealized Gain - - - 11 - 14 - 25
Unrealized
(Loss) (88) - - (82) (1) (21) - (192)
Pay Fixed Net (88) - - (71) (1) (7) - (167)
Total Unrealized
Gain - - - 143 4 353 - 500
Total Unrealized
(Loss) (88) (5) - (89) (2) (45) - (229)
Total Net $(88) $(5) $- $ 54 $ 2 $308 $- $ 271
Forward Rate Agreements
Unrealized Gain $- $- $- $ 1 $- $- $- $ 1
Unrealized (Loss) - - - (1) - - - (1)
Net $- $- $- $ - $- $- $- $ -
Currency Swaps and Forwards
Unrealized Gain $- $- $1 $ 17 $ - $ 20 $ 14 $ 52
Unrealized (Loss) - - - (12) (1) (48) (30) (91)
Net $- $- $1 $ 5 $(1) $(28) $(16) $(39)
Other Contracts (1)
Unrealized Gain $ - $- $ 1 $- $- $- $- $ 1
Unrealized (Loss) (5) - (16) - - - - (21)
Net $(5) $- $(15) $- $- $- $- $(20)
Total Unrealized
Gain $ - $ - $ 2 $ 161 $ 4 $373 $ 14 $ 554
Total Unrealized
(Loss) (93) (5) (16) (102) (3) (93) (30) (342)
Total Net $(93) $(5) $(14) $ 59 $ 1 $280 $(16)$ 212
<FN>
(1) Other contracts are principally equity swaps and collars.
Certain amounts have been reclassified to conform to the current
presentation.
</TABLE>
<PAGE> 26
END-USER DERIVATIVES (continued)
For paying variable and paying fixed interest rate swaps entered into
as an 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 were as
follows ($ in millions):
<TABLE>
<CAPTION>
At September 30, 1996
Notional
Amount Paying Variable 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>
1996 $20,080 5.58% 5.49% $2,581 5.71% 5.84% $22,661
1997-1998 20,493 5.73 5.54 4,560 4.90 5.93 25,053
1999-2000 5,385 6.32 5.88 1,298 3.60 4.94 6,683
2001 and
thereafter 5,841 6.49 5.59 891 5.36 7.22 6,732
Total $51,799 $9,330 $61,129
<FN>
All rates were those in effect at September 30, 1996. Variable rates are
primarily based on LIBOR and may change significantly, affecting future
cash flows.
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1995
Notional
Amount Paying Variable 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>
1996 $30,770 5.97% 5.87% $ 8,742 6.00% 6.21% $39,512
1997-1998 6,558 5.99 5.84 3,657 5.33 5.76 10,215
1999-2000 3,448 6.57 6.34 1,373 3.86 4.99 4,821
2001 and
thereafter 3,927 6.64 5.93 629 5.91 7.34 4,556
Total $44,703 $14,401 $59,104
<FN>
All rates were those in effect at December 31, 1995. Variable rates are
primarily based on LIBOR and may change significantly, affecting future
cash flows.
</TABLE>
<PAGE> 27
REGULATORY CAPITAL
The Federal Reserve Board's ("FRB") capital adequacy guidelines
mandate that minimum capital ratios be maintained by bank holding companies
and their bank subsidiaries. In addition, the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") mandated the establishment
of capital tiers for banks based on these ratios. The Corporation's 1995
Annual Report on Form 10-K, on page 42, provides a detailed discussion of
these guidelines and regulations.
Based on their respective regulatory capital ratios as of September
30, 1996, both Bankers Trust Company ("BTCo") and Bankers Trust (Delaware)
are well capitalized, as defined in the regulations issued by the FRB and
the other federal bank regulatory agencies setting forth the general
capital requirements mandated by FDICIA.
The table below presents the regulatory capital ratios of Bankers
Trust New York Corporation and BTCo at September 30, 1996 and December 31,
1995, along with the FRB's minimum regulatory guidelines. All of these
regulatory capital ratios exclude any impact of the securities valuation
allowance which is determined in accordance with SFAS 115.
<TABLE>
<CAPTION>
FRB
Minimum
September 30, December 31, Regulatory
1996 1995 Guidelines
<S> <C> <C> <C>
CORPORATION
Risk-Based Ratios
Tier 1 Capital 8.0% 8.5% 4.0%
Total Capital 12.7% 13.9% 8.0%
Leverage Ratio 5.3% 5.1% 3.0%
BTCo
Risk-Based Ratios
Tier 1 Capital 9.1% 9.5% 4.0%
Total Capital 12.2% 12.8% 8.0%
Leverage Ratio 5.5% 5.1% 3.0%
</TABLE>
The following were the essential components of the Corporation's and
BTCo's risk-based capital ratios (in millions):
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <C>
Corporation
Tier 1 Capital $4,770 $4,512
Tier 2 Capital 2,781 2,858
Total Capital $7,551 $7,370
Total risk-weighted assets $59,397 $53,021
</TABLE>
<PAGE> 28
REGULATORY CAPITAL (continued)
<TABLE>
<CAPTION>
September 30,December 31,
1996 1995
<S> <C> <C>
BTCo
Tier 1 Capital $4,712 $4,394
Tier 2 Capital 1,631 1,532
Total Capital $6,343 $5,926
Total risk-weighted assets $52,012 $46,389
</TABLE>
Comparing September 30, 1996 to December 31, 1995, the Corporation's
Tier 1 Capital and Total Capital ratios declined by 50 basis points and 120
basis points, respectively, as a result of the increase in total risk-
weighted assets. The Corporation's total risk-weighted assets at September
30, 1996 were $6.376 billion higher than at year-end 1995. The Leverage
Ratio increased by 20 basis points at September 30, 1996 compared to
December 31, 1995 primarily as a result of an increase in Tier 1 Capital.
These factors were also the causes for the variances in BTCo's Capital and
Leverage ratios.
PREFERRED STOCK
During the third quarter of 1996, the Parent Company purchased $50
million of its Adjustable Rate Cumulative Preferred Stock, Series Q and
Series R at a discount of $6 million.
LIQUIDITY
Liquidity is the ability to have the funds available at all times to
meet the commitments of the Corporation. The Corporation has a formal
process for managing liquidity on a global basis for the Firm as a whole as
well as for each of its significant subsidiaries. Management's guiding
policy is to maintain conservative levels of liquidity designed to ensure
that the Firm has the ability to meet its obligations under all conceivable
circumstances. Management maintains a dual focus to ensure a conservative
liquidity position by promoting asset liquidity and actively managing
liability/capital levels, maturities and diversification. The fundamental
objective in this regard is to ensure that, even in the event of a complete
loss of access to the liability markets, the Corporation will be able to
continue to fund those assets that cannot be liquidated in a timely manner.
Most of the Corporation's assets are highly liquid and of high credit
quality. The Corporation maintains excess liquidity through its base of
liquid assets. 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. Securities purchased under resale agreements and
securities borrowed are virtually all short-term in nature and are
<PAGE> 29
LIQUIDITY (continued)
collateralized with U.S. government or other marketable securities, or cash
equivalents. Trading assets are marked to market daily and primarily
consist of U.S. government and agency securities, state and municipal
securities, foreign government obligations, and money market instruments.
The Corporation's liquid assets amounted to $98.0 billion and $93.5 billion
as of September 30, and June 30, 1996, and $83.5 billion as of December 31,
1995, which equaled 80 percent, 81 percent, and 80 percent of gross total
assets at those dates respectively.
Cash Flows
The following comments apply to the consolidated statement of cash
flows, which appears on page 6.
Cash and due from banks decreased $1.5 billion during the first nine
months of 1996, as the net cash used in investing activities exceeded the
sum of the net cash provided by financing and operating activities. The
$18.6 billion of net cash used in investing activities was mostly
attributable to the net changes in securities purchased under resale
agreements ($8.8 billion), securities borrowed ($4.0 billion), and loans
($2.4 billion), as well as purchases of securities available for sale ($4.2
billion), offset in part by maturities and other redemptions of securities
available for sale ($2.3 billion). The $16.1 billion of net cash provided
by financing activities was primarily the result of increases in the net
changes in securities sold under repurchase agreements ($9.1 billion),
other short-term borrowings ($2.9 billion) and deposits ($2.9 billion), as
well as issuances of long-term debt ($2.6 billion), partially offset by
repayments of long-term debt ($856 million). The increase in net cash
provided by operating activities was mostly due to an increase in the net
change in receivables and payables from securities transactions ($2.4
billion), offset in part by a decrease in other operating assets and
liabilities, net ($962 million).
Cash and due from banks decreased $270 million during the first nine
months of 1995, as the net cash used in investing activities exceeded the
sum of the net cash provided by financing and operating activities. Within
the investing activities category, cash outflows from net changes in
securities purchased under resale agreements ($4.6 billion), securities
borrowed($2.7 billion) and purchases of securities available for sale ($3.0
billion) were offset in part by cash inflows from sales, maturities and
other redemptions of securities available for sale ($3.8 billion) as well
as net changes in federal funds sold ($2.5 billion). The $1.8 billion of
net cash provided by financing activities was largely the result of cash
inflows from the issuances of long-term debt ($3.2 billion) and net changes
in securities sold under repurchase agreements ($1.9 billion) offset in
part by cash outflows from the net changes in other short-term borrowings
($1.5 billion) and repayments of long-term debt ($1.1 billion). The $919
million of net cash provided by operating activities primarily resulted
from a $692 million net change in trading assets and liabilities.
<PAGE> 30
LIQUIDITY (continued)
Interest Rate Sensitivity
Condensed interest rate sensitivity data for the Corporation at
September 30, 1996 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.
The interest rate gaps reported in the table arise when assets are
funded with liabilities having different repricing intervals, after
considering the effect of off-balance sheet hedging instruments. Since
these 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) Sept. 30, 1996 1 year years 5 years funds Total
<S> <C> <C> <C> <C> <C>
Assets $ 89.2 $ 4.7 $ 2.4 $ 24.5 $ 120.8
Liabilities, preferred stock
of subsidiary and preferred
stock (83.2) (4.6) (3.4) (25.1) (116.3)
Common stockholders' equity - - - (4.5) (4.5)
Effect of off-balance sheet
hedging instruments (8.8) 5.8 3.0 - -
Interest rate sensitivity gap $ (2.8) $ 5.9 $ 2.0 $ (5.1) $ -
</TABLE>
<PAGE> 31
NONPERFORMING ASSETS
The components of cash basis loans, renegotiated loans, other real
estate and other nonperforming assets are shown below ($ in millions).
<TABLE>
<CAPTION>
September 30,December 31,
1996 1995
<S> <C> <C>
CASH BASIS LOANS
Domestic
Commercial and industrial $118 $263
Secured by real estate 233 297
Financial institutions - 10
Total domestic 351 570
International
Commercial and industrial 73 106
Secured by real estate 58 65
Financial institutions 4 3
Lease financing 2 -
Total international 137 174
Total cash basis loans $488 $744
Ratio of cash basis loans to total loans 3.2% 5.9%
Ratio of allowance for credit losses to cash
basis loans 198% 133%
RENEGOTIATED LOANS
Secured by real estate $89 $ 88
Other - 12
Total renegotiated loans $89 $100
OTHER REAL ESTATE $220 $259
OTHER NONPERFORMING ASSETS
Assets acquired in credit workouts $13 $66
Other - 1
Total other nonperforming assets $13 $67
Loans 90 days or more past due and still
accruing interest $- $26
</TABLE>
<PAGE> 32
NONPERFORMING ASSETS (continued)
An analysis of the changes in the Corporation's total cash basis loans
during the first nine months of 1996 follows (in millions).
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1995 $ 744
Net transfers to cash basis loans 22
Net paydowns (162)
Charge-offs (68)
Transfers to other real estate (7)
Other (41)
Balance, September 30, 1996 $ 488
</TABLE>
The Corporation's total cash basis loans amounted to $488 million at
September 30, 1996, down $256 million, or 34 percent, from December 31,
1995.
This decline is attributable to collections and charge-offs in
connection with the settlement of old derivative transactions ($78 million)
as well as decreases in loans secured by real estate ($71 million) and
various commercial and industrial loans ($101 million). Also within cash
basis loans, loans secured by real estate were $291 million and $362
million at September 30, 1996 and December 31, 1995, respectively.
Commercial and industrial loans to highly leveraged borrowers were $99
million and $153 million at September 30, 1996 and December 31, 1995,
respectively. Within cash basis loans, leveraged derivative contracts were
$42 million and $104 million at September 30, 1996 and December 31, 1995,
respectively. Based on an analysis of the potential outcome of the
remaining outstanding issues relating to leveraged derivative transactions,
management continues to believe that the expected financial impact should
be covered by existing reserves.
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 September 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.
<PAGE> 33
NONPERFORMING ASSETS (continued)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
(in millions) 1996 1995
<S> <C> <C>
Domestic Loans
Gross amount of interest that would have
been recorded at original rate $31 $50
Less, interest, net of reversals, recognized
in interest revenue 5 7
Reduction of interest revenue 26 43
International Loans
Gross amount of interest that would have
been recorded at original rate 8 13
Less, interest, net of reversals, recognized
in interest revenue - -
Reduction of interest revenue 8 13
Total reduction of interest revenue $34 $56
</TABLE>
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 1995 Annual Report on Form 10-K, on page 57,
provides a detailed discussion of the definition.
<TABLE>
<CAPTION>
Highly Leveraged Transactions
September 30, December 31,
(in millions) 1996 1995
<S> <C> <C>
Loans
Senior debt $1,266 $1,105
Subordinated debt 71 68
Total loans $1,337 $1,173
Unfunded commitments
Commitments to lend $462 $539
Letters of credit 109 263
Total unfunded commitments $571 $802
Equity investments $673 $648
Commitments to invest $273 $289
</TABLE>
<PAGE> 34
HIGHLY LEVERAGED TRANSACTIONS (continued)
The Corporation's outstanding loans were to 106 separate borrowers in
41 separate industry groups at September 30, 1996, compared to 97 separate
borrowers in 38 separate industry groups at December 31, 1995. There were
no industry concentrations which exceeded 10 percent of total HLT loans
outstanding at September 30, 1996.
In addition to the amounts shown in the table above, at September 30,
1996, the Corporation had issued commitment letters which had been
accepted, subject to documentation and certain other conditions, of $843
million (which were in various stages of syndication) and had additional
HLTs in various stages of discussion and negotiation.
During the first nine months of 1996, the Corporation originated $3.2
billion of HLT commitments. It should be noted that the Corporation's
loans and commitments in connection with HLTs fluctuate as new loans and
commitments are made and as loans and commitments are syndicated,
participated or paid.
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
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
September 30, 1996 was less than $13 million. However, at September 30,
1996, the Corporation had total exposure (loans outstanding plus unfunded
commitments) in excess of $50 million to 6 separate highly leveraged
borrowers.
At September 30, 1996, $99 million of the HLT loan portfolio was on a
cash basis. In addition, $6 million of the equity investments in HLT
companies represented assets acquired in credit workouts, which are
reported as other nonperforming assets. Net charge-offs of $18 million of
HLT loans were recorded in the first nine months of 1996. In addition, the
Corporation recorded a net gain of $101 million in connection with the
sales and/or write-offs of its equity investments in highly leveraged
companies during the first nine months of 1996.
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
$80 million during the first nine months of 1996 and that as of September
30, 1996, approximately $19 million of fees were deferred and will be
recognized as future revenue.
<PAGE> 35
PART II. OTHER INFORMATION
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.
(10) Material Contracts
iii(A) Management Contracts and Compensation Plans
(12) Statement re Computation of Ratios
(27) Financial Data Schedule
(99) Additional Exhibits
(b) Reports on Form 8-K - Bankers Trust New York Corporation filed
four reports on Form 8-K during the quarter ended September 30,
1996.
- The report dated July 18, 1996, filed the Corporation's Press
Release dated July 18, 1996, which announced earnings for the
quarter ended June 30, 1996.
- The report dated July 22, 1996, announced the filing of the
Corporation's Registration Statement on Form S-3 to register
three million shares of its Common Stock which will be issued
in connection with the merger of Wolfensohn & Co., Inc., with
and into BT Securities Corporation, a wholly-owned subsidiary of
the Corporation. In addition, the Board of Directors of the
Corporation approved the repurchase of up to three million
shares of the Corporation's Common Stock over the next year.
- The report dated July 26, 1996, filed the Corporation's opinion
of counsel delivered in connection with the issuance of the
Corporation's 6-5/8% Notes due July 30, 1999.
- The report dated August 1, 1996, filed the Corporation's Press
Release dated August 1, 1996, which announced that Wolfensohn & Co.,
Inc. has merged with Bankers Trust.
<PAGE> 36
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 November 14, 1996.
BANKERS TRUST NEW YORK CORPORATION
BY: GEOFFREY M. FLETCHER
Geoffrey M. Fletcher
Senior Vice President and
Principal Accounting Officer
BANKERS TRUST NEW YORK CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
EXHIBIT INDEX
(4) Instruments Defining the Rights of Security
Holders, Including Indentures
(v) - Long-Term Debt Indentures (a)
(10) Material Contracts
iii (a) Management Contracts and Compensation Plans
(1) Employment Agreement for David Marshall
(2) Consulting Agreement with Paul Volcker
(3) BT Investments (Australia) Limited Group Notional
Equity Participation Plan, as amended
(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
(27) Financial Data Schedule
(99) (i) Additional Exhibits
(1) Organizational Units Results for the three months ended
March 31, June 30, September 30, and December 31, 1995
and the three months ended March 31, June 30, and
September 30, 1996.
[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.
EXHIBIT 10(iii)(A)(1)
Bankers Trust Company
130 Liberty Street, New York, New York 10006
Frank N. Newman Mailing Address:
Chairman of the Board P.O. Box 318
and Church Street Station
Chief Executive Officer New York, New York 10008
Tel: 212-250-9088
Fax: 212-669-6000
September 9, 1996
By Facsimile
Mr. David Marshall
115 Hazelton Avenue
Toronto, Ontario
M5R 2E4
Dear David:
It gives me great pleasure to extend to you the following offer of employment.
You will be responsible for the firm's information systems and will be a
member of the Management Committee. For the term of this agreement, you
will report to me, as Chief Executive Officer of the Bankers Trust New York
Corporation ("the Parent") and Bankers Trust Company (the "Company"). Your
services shall be principally performed, and your office shall be located,
in New York City.
Your corporate title for the Parent will be Executive Vice President, and
subject to approval by the Board, Senior Managing Director for the Company.
Your functional title for both the Parent and Company will be Chief
Information Officer.
Your annual base salary will be US$325,000 paid monthly in equal
installments. Your annual base salary will be subject to annual review
by the Parent's compensation committee in accordance with the Parent's
practice and may be increased from time to time at the sole discretion of
the compensation committee.<PAGE>
<PAGE>
On your start date, on or about October 15, 1996, hereinafter the
"Commencement Date", you will receive:
A special one-time payment of US$470,000 (less mandatory deductions),
60,000 units from the Partnership for One Hundred Plan (POP),
25,000 units from the Partnership Equity Plan,
40,000-share stock option award, and,
A US$70,000 contribution to your ADCAP account.
Your above-mentioned stock options, as well as the options granted to you
in respect of services for 1997 and 1998 as described below, are to be
awarded under the terms and conditions of the Parent's Stock Option and
Stock Award Plan. The exercise price of stock options will be based on
the average of the high and low trading prices of the Parent's common stock
on the respective grant dates as shown on the New York Stock Exchange
transactions tape. In addition, stock options have a term of 10 years from
the date of grant, will be subject to accelerated vesting under the Plan, as
described below, and will vest on the first anniversary of the date of each
such grant.
For your services in 1996, you will also receive a guaranteed minimum bonus
of $675,000 (less mandatory deductions). Payment of the net after-tax
amount will be paid on the date that the firm normally pays bonus awards to
senior management (usually, in the following January).
For your services in 1997, you will receive the following in addition to
your base salary:
A guaranteed minimum bonus of US$750,000 (less mandatory deductions) on the
day that performances bonuses are normally paid to senior management.
A 50,000-share stock option award to be granted on the normal award date
(usually in June).
50,000 units in the Partnership Equity Plan (PEP).
A $70,000 contribution to your ADCAP account.
<PAGE>
For your services in 1998, you will receive the following in addition to
your base salary:
A guaranteed minimum bonus of US$850,000 (less mandatory deductions) on the
day that performances bonuses are normally paid to senior management.
A 50,000-share stock option award to be granted on the normal award date
(usually in June).
50,000 units in the Partnership Equity Plan (PEP).
A $70,000 contribution to your ADCAP account.
Bonus awards to managing directors of the firm are payable 70% in cash and
30% in equity of the firm, under the Equity Participation Plan.
In connection with your relocation to New York, you will be reimbursed or
paid directly for reasonable relocation expenses for you and your family.
For these purposes, relocation expenses include:
House-hunting expenses to include all travel, hotel, ground transportation
and childcare expenses for you and your spouse.
Temporary living expenses for you and your family for up to nine (9) months
from the Commencement Date.
Home buy-out of your existing residence based on the average of two
independent appraisals.
Usual and customary closing costs on the sale of your existing home
(including brokerage commissions) and on the acquisition of your new home,
including two points on any acquisition mortgage and any brokerage
commissions paid by you in connection with such purchase.
Travel expenses and the cost of moving your household goods.
A relocation allowance of $50,000.
The above relocation allowance and all reimbursements and payments of
relocation expenses will be grossed-up for tax purposes.
<PAGE>
During the term of your employment with either the Company or Parent you
will be entitled to participate in all employee benefit plans, programs and
arrangements of the Parent or any of its affiliates now or hereinafter made
available to any senior executives of the Company or Parent on a basis no
less favorable than is made available to any other such senior executives
(including, without limitation, each plan, program or arrangement providing
for retirement benefits, supplemental and excess retirement benefits, annual
and long-term incentive compensation, stock options, group life
insurance, accident and death insurance, medical and dental insurance, sick
leave, disability benefits and fringe benefits and perquisites).
In addition, you will be entitled to at least five (5) weeks paid vacation
per calendar year and you shall receive prompt reimbursement from the
Company or Parent for all reasonable out-of-pocket expenses incurred by you
in performing your duties for the Company or Parent.
You will be afforded the same indemnification protection regarding directors
and officers liability that the Company and Parent provide to their senior
executive officers and directors. In addition, you will be covered by any
directors and officers liability policy generally in force for the Company's
and Parent's senior executive officers and directors.
Our offer is contingent upon your completing our standard employment package.
The package includes an employment application, a security data sheet, a
personal information form, and confirmation of employment authorization
(which will include completing the Immigration and Naturalization Service's
Form I-9). You will also have to read and sign the Substance Abuse Policy
Employee Acknowledgment Form which is enclosed in the envelope marked
"Medical Evaluation." In addition, it will be necessary for you
to successfully complete a medical evaluation, a background investigation,
including, but not limited to, a credit investigation, and all other
components of the Company's and Parent's pre-employment screening process
to the Company's and Parent's satisfaction.
You may schedule an appointment for your medical evaluation by calling Peter
Gurney of Human Resources at (212) 250-2219. Please complete and bring the
forms in the envelope marked "Medical Evaluation" to your appointment. You
will be eligible to start employment once you have received notification of
the successful completion of your medical evaluation and credit
investigation which we estimate will take 48 hours.
The Parent recently reviewed its policies and procedures as they relate to
the handling of information of a proprietary or confidential nature.
Included in this policy is a requirement
<PAGE>
that all employee and related accounts be maintained in designated accounts
from Bankers Trust, Fleet Corporation or Smith Barney, Inc. Additional
information pertaining to this policy can be found in the Bankers Trust
employee booklet entitled, "Confidential Information, Insider Trading and
Related Matters."
Pursuant to new SEC rules pertaining to equity-based compensation plans, all
equity awards included in this letter are subject to approval of the Board
of Directors of the Parent.
In the event that before the third anniversary of the Commencement date, the
term of this agreement, your employment is terminated by the Parent and
Company other than for Cause (as defined in the Parent's Separation Policy),
the following will occur:
All cash due you from your annual base salary and guaranteed bonuses as
provided in this agreement, to the extent not previously paid will be
immediately paid out to you as a lump-sum, net of applicable withholding
taxes;
Your POP Unit Award will immediately vest. Your POP Units will remain in
the plan and will be cash valued and paid to you at the earlier of the end
of the Plan's five-year performance period or upon the stock price reaching
$100;
All PEP units provided by this agreement, to the extent not yet converted
into book-entry shares of stock under the terms of the plan, will have a
guaranteed cash-value of $25.00 per unit and be immediately distributed to
you; and,
All stock options as provided in this agreement which had been granted to
you prior to the off-payroll date, which have not vested on the off-payroll
date, will vest and become immediately exercisable.
Following the term of this agreement, you will be subject to the provisions
of the Parent's standard separation policy.
Upon a Change of Control, all guaranteed bonuses, PEP shares/units, stock
options, and POP units will vest and be distributed in accordance with the
provisions of the Parent's Change of Control Policy.
<PAGE>
Needless to say, we are all very enthusiastic at the prospect of your
joining Bankers Trust. Please sign and return one copy of this letter upon
your acceptance of our offer. Call me if you have any questions regarding
our offer.
Sincerely,
/S/FRANK N. NEWMAN
Frank N. Newman
Agreed to:
/S/DAVID MARSHALL
David Marshall
September 9, 1996
Date
page
Bankers Trust Company
130 Liberty Street, New York, New York 10006
<PAGE>
EXHIBIT 10(iii)(A)(2)
In June of 1996, Paul Volcker, who became a member of
the Board of Directors of Bankers Trust New York Corporation
(the "Corporation") and Bankers Trust Company on September
16, 1996, entered into a consulting arrangement with the
Corporation. Mr. Volcker will receive a consultancy fee of
$500,000 for the year ended December 31, 1996, which will be
paid on a monthly basis. Up to $200,000 will be made
available for setting up of an office and for hiring of an
assistant. Fees for subsequent years will be mutually
agreed upon at the beginning of each such year. While Mr.
Volcker is free to undertake other consulting arrangements,
he has agreed that through December 31, 1996, he will not
become an officer, director or partner of an existing
investment or commercial banking firm engaged in significant
merger and acquisition activities or having more than $25
million in capital. Also he will not associate with any
newly established company engaging in substantial merger and
acquisition activities other than with the knowledge of, and
in conjunction with the Corporation. After December 31,
1996, and prior to June 30, 1998, Mr. Volcker will not join
any investment or commercial banking firm with capital of
$100 million or more and in significant competition with the
Corporation. In the event that he does participate in a
small new or existing firm, he further agreed to make a good
faith effort to refer clients to the Corporation for
execution of merger and acquisition or financing
transactions.
<PAGE>
EXHIBIT 10(iii)(A)(3)
Phantom Stock Award Agreement
PHANTOM STOCK BONUS AWARD AGREEMENT OF AUSTRALIA between
Bankers Trust Australia Limited ("BT Bank"), an indirect
subsidiary of Bankers Trust New York Corporation (the
"Corporation"), the Corporation and (the
"Recipient").
WHEREAS, the purpose of BT Bank Phantom Stock Bonus Awards is to
aid BT Bank in securing and retaining officers and other key
employees of outstanding ability and to motivate such employees to
exert their best efforts on behalf of BT Bank, and have a
favourable impact on the management, growth and protection of the
business of BT Bank and its subsidiaries; and
WHEREAS, in consideration of the Recipient's past services in the
employment of BT Bank for the calendar year and of the
agreement of the Recipient to continue in the employment of BT
Bank for the time being, the Human Resources Committee of the
Corporation (the "Committee") has resolved (and so directs BT
Bank), subject to the provisions of this Agreement, to award the
Recipient a US$ cash bonus equal to the US$ fair market value of
shares of the Corporation's Common Stock (the "Phantom
Stock"), such cash bonus being calculated and payable at the end
of a deferral period beginning on the date hereof and, subject to
Section 2 hereof, ending on (the "Deferral Period")
and in connection with such award, BT Bank, the Corporation and
the Recipient agree as follows:
1. Upon receipt of this Agreement executed by the Recipient, BT
Bank and the Corporation for the purposes of calculating the award
will notionally grant of Phantom Stock to the
Recipient. This notional grant is to be used as the basis for
calculating the amount of bonus payable by BT Bank to the
Recipient at the end of the Deferral Period. Subject to Section
2, at the end of the Deferral Period, BT Bank will pay a bonus to
the Recipient equal to, the greater of, the amount determined by
multiplying the number of shares of Phantom Stock awarded to the
Recipient times the US$ fair market value of the Corporation's
common stock, par value US$1 per share (the "Common Stock") upon
the expiration of the Deferral Period, or, an amount determined by
multiplying the number of shares of Phantom Stock awarded to the
Recipient times US$ . The Recipient irrevocably authorizes
and directs BT Bank to deduct PAYE tax from the amount of the
bonus.
<PAGE>
2. The Recipient acknowledges that the Recipient's rights
hereunder may not be sold, assigned, transferred, pledged or
otherwise dealt with or encumbered. Whilst this award is only
payable at the end of the Deferral Period, it is
nonforfeitable on and after (the "Vesting Date").
If the Recipient ceases to be employed by the Corporation or
any of its direct or indirect subsidiaries prior to the
Vesting Date, the Recipient agrees that the Recipient's rights
hereunder will be forfeited without any action required by the
Recipient, the Committee or BT Bank. However, the Committee
may, in its absolute discretion, when it finds that it would
be in the best interest of BT Bank to do so, deem the
Recipient to have met the vesting period requirements and so
direct BT Bank. The Committee, as part of exercising this
discretion, may take into account any factors it thinks fit
including (without limitation) whether the Recipient resigned
from his/her employment or was terminated by BT Bank; the
reason for the cessation of employment; whether the Recipient
intended or was likely to commence employment with a
competitor; whether the employee has accepted new employment
and will be performing roles and functions in the new
employment which are similar to those the employee performed
while employed by BT (or any related body corporate of BT).
Whether or not the roles and functions are considered
"similar" will be determined in the absolute discretion of the
directors. Whether the Recipient caused, or was likely to
cause any damage to the business or reputation of BT Bank (or
any related body corporate of BT Bank); whether the Recipient
attempted to entice or take clients or other employees of BT
Bank (or any related body corporate of BT Bank) with him or
her. Further, notwithstanding anything in the foregoing to
the contrary, upon a Change of Control, as defined in Schedule
I to this Agreement, the Deferral Period in respect of all of
the bonus award shall be deemed to have ended immediately
before such Change of Control.
3. The Recipient shall not have either voting or dividend rights
with respect to the notional grant of Phantom Stock; however,
the Recipient shall be entitled to receive from BT Bank, by
way of additional bonus remuneration, dividend equivalent
payments with respect to the Phantom Stock that will coincide
with the dividends actually paid by the Corporation on its
Common Stock in terms of both payment amounts and periods.
The Recipient will become entitled to the dividend equivalent
amount on the ex date applicable to the dividend actually paid
by the Corporation on its Common Stock. The dividend
equivalent payments will be converted to A$ by BT Bank at the
closing A$/US$ exchange rate on the business day preceding
payment of the dividend equivalent amount by BT Bank (as
<PAGE>
determined by BT Bank in good faith). The dividend equivalent
payments shall be made within thirty days after the relevant
dividends are paid by the Corporation and will be made Net
After Tax.
4. Neither this Agreement nor any action taken under this
Agreement shall be construed as giving the Recipient any right
to be retained in the employ of BT Bank.
5. The Recipient acknowledges that the Committee may in its
absolute discretion (including, without limitation, to take
account of any consolidation, subdivision or bonus issue of
the Corporation's stock) amend the terms and conditions of
this Agreement including retroactive amendments and may so
direct BT Bank, provided, however, that no such amendment
shall materially impair the Recipient's rights hereunder
without his or her consent.
6. The award of bonus set forth in this Agreement shall be
subject to cancellation by the Committee, which will so advise
BT Bank, unless within twenty one (21) days of the date herein
above set forth the Recipient delivers or mails a duly
executed copy of this Agreement, to Bankers Trust New York
Corporation, 130 Liberty Street, c/o Human Resources
Department, New York, New York 10006.
7. Notwithstanding anything to the contrary in this Agreement,
the amount of the bonus is to be reduced by the payroll tax,
superannuation fund contributions (in lieu of superannuation
guarantee charge) and any other computation type "on" costs
determined by BT Bank in good faith to be referable thereto.
8. As used in this Agreement, "Net After Tax" means the amount
determined by BT Bank in good faith after deduction from the
bonus amount, as reduced under Section 7, of the normal pay as
you earn tax installment deductions.
9. As used in this Agreement, the "fair market value" of the
Corporation's Common Stock on a particular day is the weighted
average price of the Corporation's Common Stock traded on the
New York Stock Exchange on that particular day (or where that
particular day is not a business day, the immediate preceding
business day) as determined in good faith by BT Bank, as to
which a certificate in writing by the secretary for the time
being of BT Bank shall (in the absence of fraud or manifest
material error) be conclusive.
10.Notwithstanding the foregoing, this award of bonus is
contingent on the approval of the Committee and the Board of
Directors of the Corporation.
<PAGE>
11.This agreement shall be construed and its provisions enforced
and administered in accordance with the law of Australia.
IN WITNESS WHEREOF, BT Bank and the Corporation have duly executed
this Phantom Stock Bonus Plan Agreement on the date set forth
above.
BANKERS TRUST NEW YORK CORPORATION
BY
BANKERS TRUST AUSTRALIA LIMITED
BY
Agreed to this 3rd day of August, 1995
Recipient
<PAGE>
Schedule 1
As used in this Agreement, a "Change of Control" shall mean the
following events:
(i) The acquisition, other than from the Corporation, by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either the then outstanding shares of common stock of
the Corporation (the "Outstanding Corporation Common Stock") or
the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in the
election for directors (the "Corporation Voting Securities"),
provided, however, that any acquisition by the Corporation or any
of its subsidiaries, or any employee benefit plan (or related
unit) of the Corporation or its subsidiaries, or any corporation
with respect to which, following such acquisition, more than 80%
of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors, is then beneficially
owned, directly or indirectly by the individuals and entities who
were the beneficial owners, respectively, of the Outstanding
Corporation Common Stock and Corporation Voting Securities
immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such
acquisition, of the Outstanding Corporation Common Stock and
Corporation Voting Securities, as the case may be, shall not
constitute a Change of Control; or
(ii) Individuals who, as of January 1, 1994, constitute the Board
(as of the date hereof the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board, provided that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the
Corporation (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act); or
(iii) Approval by the stockholders of the Corporation of a
reorganization, merger or consolidation, in each case, with
respect to which the individual and entities who were the
<PAGE>
respective beneficial owners of the common stock and voting
securities of the Corporation immediately prior to such
reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 80% of, respectively, the then
outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such reorganization, merger of
consolidation, or a complete liquidation or dissolution of the
Corporation or of the sale or other disposition of all or
substantially all of the assets of the Corporation.
Anything herein to the contrary notwithstanding, a Change of
Control shall not be deemed to have occurred if such Change of
Control results from or arises out of a purchase or other
acquisition of the Corporation, directly or indirectly, by a
corporation or other entity in which the Recipient has a direct or
indirect equity interest; provided, however, that the limitation
contained in this sentence shall not apply to any direct or
indirect equity interest in a corporation or other entity (a)
which equity interest is part of a class of equity interests which
are publicly traded on any securities exchange or other market
system, (b) received by the Recipient, without the Recipient's
concurrence or consent, as a result of a purchase or other
acquisition of the Corporation by such corporation or other
entity, or (c) received by the Recipient without the Recipient's
concurrence or consent, in connection with a purchase or other
acquisition of the Corporation by such corporation or other entity
in respect of any stock options or performance awards granted to
the Recipient by the BT Bank or the Corporation.
<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>
Nine Months
Ended
Year Ended December 31, Sept 30,
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Earnings:
1. Income before
income taxes and
cumulative effects
of accounting
changes $ 834 $ 906 $1,550 $ 869 $ 215 $ 663
2. Add: Fixed charges
excluding
capitalized
interest
(Line 10) 3,614 3,099 3,148 3,884 5,356 4,034
3. Less: Equity in undistri-
buted income of
unconsolidated
subsidiaries and
affiliates 31 40 30 45 28 23
4. Earnings including
interest on deposits 4,417 3,965 4,668 4,708 5,543 4,674
5. Less: Interest on
deposits 1,589 1,119 1,013 965 1,359 1,016
6. Earnings excluding
interest on deposits $2,828 $2,846 $3,655 $3,743 $4,184 $3,658
Fixed Charges:
7. Interest Expense $3,585 $3,072 $3,122 $3,858 $5,330 $4,014
8. Estimated interest
component of net
rental expense 29 27 26 26 26 20
9. Amortization of debt
issuance expense - - - - - -
10. Total fixed charges
including interest on
deposits and excluding
capitalized interest 3,614 3,099 3,148 3,884 5,356 4,034
11. Add: Capitalized
interest - - - - - -
12. Total fixed charges 3,614 3,099 3,148 3,884 5,356 4,034
13. Less: Interest on
deposits
(Line 5) 1,589 1,119 1,013 965 1,359 1,016
14. Fixed charges excluding
interest on deposits $2,025 $1,980 $2,135 $2,919 $3,997 $3,018
Consolidated Ratios of Earnings
to Fixed Charges:
Including interest on
deposits
(Line 4/Line 12) 1.22 1.28 1.48 1.21 1.03 1.16
Excluding interest on
deposits
(Line 6/Line 14) 1.40 1.44 1.71 1.28 1.05 1.21
</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>
Nine
Months
Ended
Year Ended December 31, Sept 30,
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Earnings:
1. Income before
income taxes and
cumulative effect
of accounting
changes $ 834 $ 906 $1,550 $ 869 $ 215 $ 663
2. Add: Fixed charges
excluding
capitalized
interest
(Line 13) 3,614 3,099 3,148 3,884 5,356 4,034
3. Less: Equity in undistri-
buted income of
unconsolidated
subsidiaries and
affiliates 31 40 30 45 28 23
4. Earnings including
interest on deposits 4,417 3,965 4,668 4,708 5,543 4,674
5. Less: Interest on
deposits 1,589 1,119 1,013 965 1,359 1,016
6. Earnings excluding
interest on deposits $2,828 $2,846 $3,655 $3,743 $4,184 $3,658
Preferred Stock Dividend Requirements:
7. Preferred stock dividend
requirements $ 34 $ 30 $ 23 $ 28 $ 51 $ 37
8. Ratio of income from
continuing operations
before income taxes to
income from continuing
operations after income
taxes 125% 142% 145% 141% 145% 143%
9. Preferred stock dividend
requirements on a pretax
basis $ 43 $ 43 $ 33 $ 39 $ 74 $ 53
Fixed Charges:
10. Interest Expense $3,585 $3,072 $3,122 $3,858 $5,330 $4,014
11. Estimated interest
component of net
rental expense 29 27 26 26 26 20
12. Amortization of debt
issuance expense - - - - - -
13. Total fixed charges
including interest on
deposits and excluding
capitalized interest 3,614 3,099 3,148 3,884 5,356 4,034
14. Add: Capitalized
interest - - - - - -
15. Total fixed charges 3,614 3,099 3,148 3,884 5,356 4,034
16. Add: Preferred stock
dividend require-
ments - pretax
(Line 9) 43 43 33 39 74 53
<PAGE>
17. Total combined fixed
charges and preferred
stock dividend require-
ments on a pretax
basis 3,657 3,142 3,181 3,923 5,430 4,087
18. Less: Interest on
deposits
(Line 5) 1,589 1,119 1,013 965 1,359 1,016
19. Combined fixed charges
and preferred stock
dividend requirements
on a pretax basis
excluding interest on
deposits $2,068 $2,023 $2,168 $2,958 $4,071 $3,071
Consolidated Ratios of Earnings
to Combined Fixed Charges
and Preferred Stock
Dividend Requirements:
Including interest on
deposits
(Line 4/Line 17) 1.21 1.26 1.47 1.20 1.02 1.14
Excluding interest on
deposits
(Line 6/Line 19) 1.37 1.41 1.69 1.27 1.03 1.19
</TABLE>
<PAGE>
BANKERS TRUST NEW YORK CORPORATION
130 LIBERTY STREET
NEW YORK, NEW YORK 10006
Geoffrey M. Fletcher
Senior Vice President and
Principal Accounting Officer
November 14, 1996
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 September 30, 1996 (the
"Form 10-Q"). The Form 10-Q is being filed electronically through the
EDGAR System.
If there are any question 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
Attachment
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BANKERS
TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CONDITION
AT SEPTEMBER 30, 1996 AND THE CONSOLIDATED STATEMENT OF INCOME FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 825
<INT-BEARING-DEPOSITS> 4,100
<FED-FUNDS-SOLD> 856
<TRADING-ASSETS> 47,757
<INVESTMENTS-HELD-FOR-SALE> 7,461
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 15,264
<ALLOWANCE> 967
<TOTAL-ASSETS> 120,847
<DEPOSITS> 28,672
<SHORT-TERM> 42,788<F1>
<LIABILITIES-OTHER> 7,902<F2>
<LONG-TERM> 10,507
0
816
<COMMON> 84
<OTHER-SE> 4,424
<TOTAL-LIABILITIES-AND-EQUITY> 120,847
<INTEREST-LOAN> 740
<INTEREST-INVEST> 331
<INTEREST-OTHER> 1,763<F3>
<INTEREST-TOTAL> 4,718
<INTEREST-DEPOSIT> 974
<INTEREST-EXPENSE> 4,014
<INTEREST-INCOME-NET> 704
<LOAN-LOSSES> 5
<SECURITIES-GAINS> 51
<EXPENSE-OTHER> 2,395
<INCOME-PRETAX> 663
<INCOME-PRE-EXTRAORDINARY> 663
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 465
<EPS-PRIMARY> 5.19
<EPS-DILUTED> 5.16
<YIELD-ACTUAL> 1.04
<LOANS-NON> 488
<LOANS-PAST> 0
<LOANS-TROUBLED> 89
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 992
<CHARGE-OFFS> 68
<RECOVERIES> 38
<ALLOWANCE-CLOSE> 967
<ALLOWANCE-DOMESTIC> 232
<ALLOWANCE-FOREIGN> 215
<ALLOWANCE-UNALLOCATED> 520
<FN>
<F1>Short-term borrowings include the following:
Securities sold under repurchase agreements 23,989
Other short-term borrowings 18,799
Total 42,788
<F2>Other liabilities include the following:
Accounts payable and accrued expenses 5,252
Other liabilities 2,650
Total 7,902
<F3>Other interest income includes the following:
Interest-bearing deposits with banks 141
Federal funds sold 92
Securities purchased under resale agreements 840
Securities borrowed 690
Total 1,763
</FN>
</TABLE>
<PAGE>
EXHIBIT 99.1
The following tables analyze the results by Organizational Units. Refer to
page 8 of the Quarterly Report on Form 10-Q for the quarter ended September
30, 1996 for Organizational Units' assumptions.
<TABLE>
<CAPTION>
Total Non- Pretax Net
Three Months Ended March 31, 1996 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $204 $ 95 $109 $ 77
Risk Management Services 78 77 1 1
Trading & Sales 96 61 35 24
Investment Management 69 68 1 1
Client Processing Services 187 157 30 21
Australia/New Zealand 98 64 34 24
Asia 33 25 8 6
Latin America 136 109 27 19
Corporate/Other 57 105 (48) (35)
Total $958 $761 $197 $138
</TABLE>
<TABLE>
<CAPTION>
Total Non- Pretax Net
Three Months Ended June 30, 1996 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $ 274 $118 $156 $109
Risk Management Services 44 76 (32) (22)
Trading & Sales 89 65 24 17
Investment Management 74 68 6 4
Client Processing Services 203 166 37 26
Australia/New Zealand 114 70 44 31
Asia 35 26 9 7
Latin America 166 115 51 36
Corporate/Other 42 121 (79) (57)
Total $1,041 $825 $216 $151
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Total Non- Pretax Net
Three Months Ended September 30, 1996 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $ 231 $122 $109 $ 77
Risk Management Services 84 80 4 3
Trading & Sales 107 65 42 29
Investment Management 76 70 6 4
Client Processing Services 200 165 35 25
Australia/New Zealand 138 77 61 43
Asia 30 24 6 5
Latin America 123 94 29 20
Corporate/Other 70 112 (42) (30)
Total $1,059 $809 $250 $176
</TABLE>
<TABLE>
<CAPTION>
Total Non- Pretax Net
Three Months Ended March 31, 1995 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $ 95 $ 63 $ 32 $ 24
Risk Management Services 35 77 (42) (30)
Trading & Sales 70 54 16 11
Investment Management 67 73 (6) (4)
Client Processing Services 174 145 29 20
Australia/New Zealand 95 64 31 22
Asia 15 20 (5) (3)
Latin America (62) 92 (154) (108)
Corporate/Other 21 146 (125) (89)
Total $510 $734 $(224) $(157)
</TABLE>
<TABLE>
<CAPTION>
Total Non- Pretax Net
Three Months Ended June 30, 1995 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $171 $ 64 $107 $ 74
Risk Management Services 56 71 (15) (9)
Trading & Sales 68 56 12 8
Investment Management 69 65 4 2
Client Processing Services 179 141 38 27
Australia/New Zealand 99 62 37 25
Asia 37 26 11 8
Latin America 107 112 (5) (4)
Corporate/Other 23 81 (58) (40)
Total $809 $678 $131 $ 91
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Total Non- Pretax Net
Three Months Ended September 30, 1995 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $184 $ 83 $101 $ 70
Risk Management Services 107 94 13 9
Trading & Sales 124 70 54 38
Investment Management 64 68 (4) (3)
Client Processing Services 177 140 37 25
Australia/New Zealand 97 65 32 22
Asia 7 26 (19) (14)
Latin America 123 119 4 3
Corporate/Other 69 63 6 5
Total $952 $728 $224 $155
</TABLE>
<TABLE>
<CAPTION>
Total Non- Pretax Net
Three Months Ended December 31, 1995 Total Net interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
<S> <C> <C> <C> <C>
Investment Banking $333 $106 $227 $158
Risk Management Services 34 95 (61) (44)
Trading & Sales 99 64 35 25
Investment Management 65 72 (7) (5)
Client Processing Services 187 157 30 21
Australia/New Zealand 110 65 45 33
Asia 17 29 (12) (10)
Latin America 99 116 (17) (11)
Corporate/Other (6) 54 (60) (41)
Total $938 $758 $180 $126
</TABLE>
