<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 15, 1996
--------------
BANKERS TRUST NEW YORK CORPORATION
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK
------------------------------------------------------------
(State or other jurisdiction of incorporation)
1-5920 13-6180473
- ------------------------------------ -------------------------------
(Commission file number) IRS employer identification no.)
280 PARK AVENUE, NEW YORK NEW YORK 10017
- ----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 250-2500
--------------
<PAGE>
ITEM 5. OTHER EVENTS
The purpose of this Current Report on Form 8-K is to file certain
information to be incorporated into currently effective registration statements
filed by the Registrant with the Securities and Exchange Commission under the
Securities Act of 1933, as amended. Such information contained in the
Registrant's Press Releases dated April 15 and April 16, 1996, is described
below and is incorporated herein by reference. Also incorporated herein is
certain additional financial information relating to an historical analysis of
the Registrant's net income by Organizational Unit for the years ended December
31, 1992 through 1995, and quarterly data for 1992 through 1995 and the 1st
quarter of 1996. See also page 11 of Registrant's press release dated April 16,
1996 for Organizational Unit definitions and assumptions.
1. Review of certain financial information.
2. The unaudited consolidated financial position of Bankers Trust New York
Corporation and its subsidiaries at March 31, 1996 and 1995 and the audited
consolidated financial position of Bankers Trust New York Corporation and its
subsidiaries at December 31, 1995, and its unaudited consolidated results of
operations for the three-month periods ended March 31, 1996 and 1995 and
December 31, 1995.
In the opinion of the Registrant's management, all material
adjustments necessary for a fair presentation of the Corporation's consolidated
financial position at March 31, 1996 and 1995 and December 31, 1995, and its
consolidated results of operations for the three-month periods ended March 31,
1996 and 1995 and December 31, 1995 have been made. All such adjustments were of
a normal recurring nature. The results of operations for the three-month period
ended March 31, 1996 is not necessarily indicative of the results of operations
for the full year or any other interim period.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Press Release dated April 15, 1996, announcing expected
election of Frank N. Newman to the position of Chairman
of the Board of Bankers Trust New York Corporation and
Bankers Trust Company.
99.2 Press Release of the Registrant dated April 16, 1996
disclosing 1st quarter financial results.
99.3 Additional financial information.
<PAGE>
SIGNATURES
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, hereunto duly authorized.
BANKERS TRUST NEW YORK CORPORATION
By /s/ Gordon S. Calder, Jr.
-----------------------------------
Gordon S. Calder, Jr.
Assistant Secretary
Date: April 18, 1996
<PAGE>
BANKERS TRUST NEW YORK CORPORATION
FORM 8-K DATED APRIL 15, 1996
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
99.1 Press Release dated April 15, 1996, announcing expected
election of Frank N. Newman to the position of Chairman
of the Board of Bankers Trust New York Corporation and
Bankers Trust Company.
99.2 Press Release of the Registrant dated April 16, 1996
disclosing 1st quarter financial results.
99.3 Additional financial information.
<PAGE>
EXHIBIT 99.1
NEWMAN TO SUCCEED SANFORD AS BANKERS TRUST CHAIRMAN
New York, April 15, 1996 -- Frank N. Newman, president and chief executive
officer of Bankers Trust New York Corporation and Bankers Trust Company, is
scheduled to be formally named to succeed Charles. S. Sanford, Jr., as chairman
of the two companies at a Board of Directors meeting following tomorrow's annual
meeting of Bankers Trust shareholders.
Mr. Sanford had announced in May of 1995 his intention to retire by mid-
1996, having advised Bankers Trust's Board of Directors two years earlier of his
plans to step down by age 60. He joined Bankers Trust in 1961 and headed what
is now the Trading and Sales business before being elected president in 1983.
He was elected deputy chairman in 1986 and chairman in 1987.
Mr. Newman, who will serve as chairman, president and chief executive
officer, joined Bankers Trust as senior vice chairman in September of 1995 and
was named president and chairman-designate the following month. He assumed the
chief executive officer responsibilities from Mr. Sanford on January 1, 1996.
Mr. Newman was previously deputy secretary of the Treasury and, earlier, vice
chairman and chief financial officer of BankAmerica Corporation.
In a joint statement, Mr. Newman and Mr. Sanford said: "The fundamental
strengths of the franchise -- solid capital, quality services, a truly global
network and extremely capable and innovative people -- provide an exceptional
platform for the future. The firm's commitment now is to build on those
strengths, serve its clients faithfully and professionally, and return to
competitive earnings performance."
-30-
For additional information, contact Tom Parisi, Bankers Trust, (212) 250 7235.
This and other press releases are available at http://www.bankerstrust.com.
<PAGE>
EXHIBIT 99.2
TUESDAY, APRIL 16, 1996
BANKERS TRUST REPORTS IMPROVED FIRST QUARTER EARNINGS OF $138 MILLION, OR $1.52
EARNINGS PER SHARE
New York, April 16, 1996 -- Bankers Trust New York Corporation earned $138
million, or $1.52 primary earnings per share, in the first quarter of 1996. The
first quarter earnings improved from both the fourth quarter 1995 results of
$126 million, or $1.36 primary earnings per share, and from the first quarter
1995 loss of $157 million, or $2.11 primary loss per share. Return on common
equity increased to 12% in the first quarter of 1996.
"Strong performance from several business lines contributed to Bankers Trust's
improved first quarter results," said Frank N. Newman, chief executive officer.
"Our Investment Banking business had a strong quarter, and Trading & Sales,
geographically-based businesses in Australia/New Zealand and Latin America, and
our Client Processing Services business all turned in solid results. A
substantial increase in new transaction revenue with clients returned our
restructured Risk Management Products & Services business to modest
profitability in the quarter. Our Investment Management and Asia businesses
also returned to profitability. The first quarter's results were not affected
by unusual gains or charges."
"We were also pleased to see renewed strength in the revenue category which for
accounting purposes is called 'trading'. A large part of the increase in the
quarter was due to growth in client transaction activity in our Risk Management
Products & Services, and Investment Banking businesses. In all, Bankers Trust's
first quarter results put us in an excellent position to achieve our planned
return to more competitive earnings performance. As we move ahead, our
continuing commitment is to provide our clients with effective, innovative
products and services of the highest quality," Mr. Newman added.
<PAGE>
ORGANIZATIONAL HIGHLIGHTS
In recent years a Business Function approach was used to analyze the principal
components of the financial performance of the Corporation's businesses. As
reported in the Corporation's 1995 Annual Report, the Corporation has changed
this financial analysis to reflect more closely its organizational structure.
The following table analyzes net income (loss) by Organizational Units:
<TABLE>
<CAPTION>
Net Income (Loss) by Organizational Unit
First Fourth FIRST
Quarter Quarter QUARTER
($ in millions) 1995 1995 1996
- -------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Investment Banking $ 24 $ 158 $ 77
Risk Management Products & Services (30) (44) 1
Trading & Sales 11 25 24
Investment Management (4) (5) 1
Client Processing Services 20 21 21
Australia/New Zealand 22 33 24
Asia (3) (10) 6
Latin America (108) (11) 19
Corporate (including unallocated overhead) (89) (41) (35)
- -------------------------------------------- ----- ----- -----
Net Income (Loss) $(157) $ 126 $ 138
============================================ ===== ===== =====
</TABLE>
Note: See page 11 for Organizational Unit definitions and assumptions.
The Investment Banking business produced net income of $77 million in the first
------------------
quarter of 1996, compared with $158 million in the fourth quarter and $24
million in the first quarter of the previous year. Fourth quarter 1995 results
included a $102 million after-tax gain on the sale of a major portion of the
Corporation's investment in Northwest Airlines Corporation; this quarter's
results, while including gains from private equity investments, did not benefit
from any such large items.
2
<PAGE>
Risk Management Products & Services produced net income of $1 million in the
- -----------------------------------
first quarter of 1996, a significant improvement from the losses seen in the
business during 1995. The first quarter improvement was due to an increase in
new business revenue as the Corporation continues its client-focused effort to
restructure its Risk Management Products & Services business.
Net income from the Trading & Sales business was down slightly from the fourth
---------------
quarter of 1995, but was up significantly from the first quarter of 1995.
The Corporation's Investment Management business, which for reporting purposes
---------------------
does not include investment management activities in Australia/New Zealand,
reported a small net income in the first quarter of 1996, a modest improvement
from previous quarters. The Corporation has restructured this business as well,
and is implementing a development plan to improve results in the future.
Client Processing Services produced $21 million of net income in the first
- --------------------------
quarter of 1996, consistent with the first and fourth quarters of 1995.
Australia/New Zealand business net income was $24 million in the first quarter
- ---------------------
of 1996, down from the fourth quarter of 1995, which included particularly
strong corporate finance results. Net income was up $2 million from the first
quarter of 1995.
Asia net income was $6 million in the first quarter of 1996, as compared with
- ----
losses in the first and fourth quarters of 1995. The increased income was
primarily due to improved revenue in Thailand and Japan.
Latin America net income was $19 million in the first quarter of 1996, due to
- -------------
strong trading results and improved revenue from our Chilean insurance
subsidiaries. The first quarter 1995 net loss 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. These positions were resolved during the first half of 1995.
QUARTERLY FINANCIAL COMPARISONS
FIRST QUARTER 1996 VERSUS FOURTH QUARTER 1995
Net income of $138 million for the first quarter of 1996 was up from the $126
million earned in the fourth quarter of 1995, and was not affected by unusual
gains or charges. The fourth quarter of 1995 included three unusual items as
described below.
First quarter 1996 trading revenue increased $164 million over the fourth
quarter of 1995. The prior year's fourth quarter included a $51 million charge
to trading revenue from settlements of old leveraged derivative transactions.
Increased client transaction activity in the
3
<PAGE>
Risk Management Products & Services business and the Investment Banking business
accounted for most of the remaining increase in trading revenue. (For
comparisons of trading revenue by Organizational Unit see page 6, below).
Securities available for sale gains decreased $136 million from the fourth
quarter of 1995. The prior quarter included a $145 million pre-tax gain on the
sale of a substantial portion of the Corporation's investment in Northwest
Airlines Corporation.
Within noninterest expenses, agency and professional service fees decreased $44
million from the fourth quarter of 1995, which included approximately $35
million of legal expenses in connection with leveraged derivative transactions
issues.
FIRST QUARTER 1996 VERSUS FIRST QUARTER 1995
The $138 million earned in the first quarter of 1996 showed a significant
improvement from the $157 million net loss recorded in the prior year's first
quarter. Included in that loss was a $35 million after-tax severance-related
charge.
Total trading revenue and trading-related net interest revenue was $277 million
for the first quarter of 1996, compared with a $77 million loss for the
comparable period of 1995. The first quarter of 1995 net loss was primarily the
result of extreme price fluctuations and illiquidity in the markets for Latin
American securities as discussed earlier.
CREDIT QUALITY
Credit quality remained high in the quarter. Cash basis loans declined from
$744 million in the fourth quarter of 1995, to $715 million in the first quarter
of 1996. There were no material changes in the Corporation's residual leveraged
derivative exposures. Based on an analysis of the potential outcome of
outstanding issues relating to leveraged derivative transactions, management
continues to believe that the expected financial impact should be covered by
existing reserves.
CAPITAL
Total stockholders' equity at March 31, 1996 was $5.055 billion, an increase of
$71 million and $387 million compared with December 31, 1995 and March 31, 1995,
respectively. The Corporation estimates that its ratios of Tier 1 Capital and
Total Capital to risk-adjusted assets were approximately 8.00% and 13.10%,
respectively, at March 31, 1996.
- -------------------------------------------------------------------------------
For additional information, contact Douglas Kidd, 212 250-7225 or Tom Parisi,
212 250-7235 (Media); Howard Schneider 212 250-7908 (Investors).
Bankers Trust news releases, including quarterly results, are available on the
Internet (http://www.bankerstrust.com).
The remainder of this release contains financial statements and tables and
Organizational Unit definitions and assumptions.
4
<PAGE>
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share data)
(unaudited)
<TABLE>
<CAPTION>
First Fourth FIRST
Quarter Quarter QUARTER
1995 1995 1996
-------- ------- -------
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $1,353 $1,457 $1,590
Interest expense 1,171 1,248 1,377
- --------------------------------------------------- ------ ------ ------
Net interest revenue 182 209 213
Provision for credit losses 14 10 5
- --------------------------------------------------- ------ ------ ------
Net interest revenue after provision
for credit losses 168 199 208
- --------------------------------------------------- ------ ------ ------
NONINTEREST REVENUE
Trading (78) 83 247
Fiduciary and funds management 171 186 183
Corporate finance fees 72 125 86
Other fees and commissions 73 79 87
Net revenue from equity investment transactions 26 22 21
Securities available for sale gains 2 151 15
Insurance premiums 49 58 62
Other 27 35 49
- --------------------------------------------------- ------ ------ ------
Total noninterest revenue 342 739 750
- --------------------------------------------------- ------ ------ ------
NONINTEREST EXPENSES
Salaries 208 206 201
Incentive compensation and employee benefits 133 185 227
Agency & other professional service fees 76 104 60
Communication & data services 47 44 46
Occupancy, net 41 32 37
Furniture and equipment 42 40 41
Travel and entertainment 23 21 18
Provision for policyholder benefits 56 69 72
Other 58 57 59
Provision for severance-related costs 50 - -
- --------------------------------------------------- ------ ------ ------
Total noninterest expenses 734 758 761
- --------------------------------------------------- ------ ------ ------
Income (loss) before income taxes (224) 180 197
Income taxes (benefit) (67) 54 59
- --------------------------------------------------- ------ ------ ------
NET INCOME (LOSS) $ (157) $ 126 $ 138
=================================================== ====== ====== ======
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK $ (165) $ 111 $ 123
=================================================== ====== ====== ======
Cash dividends declared per common share $1.00 $1.00 $1.00
=================================================== ====== ====== ======
EARNINGS (LOSS) PER COMMON SHARE:
PRIMARY $(2.11) $1.36 $1.52
=================================================== ====== ====== ======
FULLY DILUTED $(2.11) $1.36 $1.51
=================================================== ====== ====== ======
</TABLE>
Certain prior period amounts have been reclassified to conform to the current
presentation.
5
<PAGE>
TRADING REVENUE AND TRADING-RELATED NET INTEREST REVENUE
<TABLE>
<CAPTION>
First Fourth FIRST
Quarter Quarter QUARTER
($ in millions) 1995 1995 1996
- ---------------------------------------- -------- -------- -------
<S> <C> <C> <C>
Trading Revenue by Organizational Unit
Investment Banking $ (9) $ 20 $ 33
Risk Management Product & Services 44 41 105
Trading and Sales 25 40 35
Investment Management 1 (1) -
Client Processing Services 1 2 2
Australia/New Zealand 22 10 24
Asia (7) 5 13
Latin America (136) 12 35
Corporate (19) (46) -
- ---------------------------------------- ----- ----- -----
Total Trading Revenue $ (78) $ 83 $ 247
======================================== ===== ===== =====
Trading Related Net Interest Revenue $ 1 $ 13 $ 30
======================================== ===== ===== =====
Total Trading and Trading-Related
Net Interest Revenue $ (77) $ 96 $ 277
======================================== ===== ===== =====
</TABLE>
Note: The Corporation accounts for revenues from a wide range of business
activities as "trading revenue". The Organizational Unit presentation of
trading revenue in the table above includes revenue from business activities as
follows:
Investment Banking trading revenues are produced in secondary market
------------------
activities with clients, primarily in sectors where the Corporation also serves
as underwriter. Also included here are revenues arising from a small portion of
private equity investments that are accounted for on a mark-to-market basis.
Risk Management Products & Services trading revenues are produced
-----------------------------------
primarily from new derivative transactions with clients and from revenues
resulting from managing the risks the Corporation assumes on such transactions.
Trading & Sales trading revenues are produced by proprietary position-
---------------
taking, including on an arbitraged basis, as well as market making and other
client activities.
Geographically-Based Businesses produce trading revenues from
-------------------------------
all the above types of activities.
Corporate Unit trading revenues include various transactions which,
for management accounting purposes, are not recorded in Organizational Units.
An example is the $51 million charge-off to revenue associated with leveraged
derivatives in the fourth quarter of 1995.
6
<PAGE>
NET INTEREST REVENUE
<TABLE>
<CAPTION>
First Fourth FIRST
Quarter Quarter QUARTER
($ in millions) 1995 1995 1996
- ----------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Nontrading-related net interest revenue $ 181 $ 196 $ 183
Trading-related net interest revenue 1 13 30
- ----------------------------------------- -------- -------- --------
Net interest revenue $ 182 $ 209 $ 213
========================================= ======== ======== ========
Average rates (fully taxable basis)
Yield on interest-earning assets 7.09% 6.72% 7.49%
Cost of interest-bearing liabilities 6.28% 5.87% 6.68%
Interest rate spread .81% .85% .81%
Net interest margin 1.02% .99% 1.02%
========================================= ======== ======== ========
Average balances
Loans $ 11,683 $ 12,823 $ 12,394
Total interest-earning assets $ 78,228 $ 86,315 $ 85,576
Total assets $104,539 $114,853 $113,671
Total interest bearing liabilities $ 75,642 $ 84,335 $ 82,912
========================================= ======== ======== ========
</TABLE>
7
<PAGE>
BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in millions)
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31, MARCH 31,
1995 1995 1996
----------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 1,603 $ 2,337 $ 1,181
Interest-bearing deposits with banks 2,900 2,023 1,377
Federal funds sold 2,115 854 1,038
Securities purchased under resale
agreements 15,040 13,206 15,670
Securities borrowed 10,873 10,951 15,390
Trading assets:
Government securities 20,094 20,704 18,345
Corporate debt securities 4,012 5,648 5,670
Equity securities 3,639 5,098 6,024
Swaps, options and other derivative contracts 18,581 10,555 10,330
Other trading assets 5,277 5,888 5,136
- ------------------------------------------------ -------- -------- --------
Total trading assets 51,603 47,893 45,505
Securities available for sale 6,019 6,283 6,880
Loans 11,731 12,633 13,088
Allowance for credit losses (1,245) (992) (987)
Accounts receivable and accrued interest 2,034 4,220 4,072
Other assets 4,689 4,594 4,930
- ------------------------------------------------ -------- -------- --------
Total $107,362 $104,002 $108,144
================================================ ======== ======== ========
LIABILITIES
Noninterest-bearing deposits
Domestic offices $ 2,352 $ 2,687 $ 1,997
Foreign offices 532 605 545
Interest-bearing deposits
Domestic offices 5,433 5,402 5,824
Foreign offices 16,279 17,014 14,190
- ------------------------------------------------ -------- -------- --------
Total deposits 24,596 25,708 22,556
Trading liabilities:
Securities sold, not yet purchased
Government securities 9,931 11,092 11,897
Equity securities 2,230 3,262 3,918
Other trading liabilities 139 473 331
Swaps, options and other derivative contracts 17,083 11,264 10,903
- ------------------------------------------------ -------- -------- --------
Total trading liabilities 29,383 26,091 27,049
Securities sold under repurchase agreements 18,631 15,247 23,209
Other short-term borrowings 16,396 15,761 12,493
Accounts payable and accrued expenses 4,137 3,931 4,665
Other liabilities 2,680 2,736 2,742
Long-term debt 6,621 9,294 10,125
- ------------------------------------------------ -------- -------- --------
Total liabilities 102,444 98,768 102,839
- ------------------------------------------------ -------- -------- --------
PREFERRED STOCK OF SUBSIDIARY 250 250 250
- ------------------------------------------------ -------- -------- --------
STOCKHOLDERS' EQUITY
Preferred stock 639 865 866
Common stock 84 84 84
Capital surplus 1,306 1,302 1,304
Retained earnings 3,243 3,316 3,351
Common stock in treasury, at cost (393) (336) (311)
Other stockholders' equity (211) (247) (239)
- ------------------------------------------------ -------- -------- --------
Total stockholders' equity 4,668 4,984 5,055
- ------------------------------------------------ -------- -------- --------
Total $107,362 $104,002 $108,144
================================================ ======== ======== ========
</TABLE>
Certain prior period amounts have been reclassified to conform to the current
presentation.
8
<PAGE>
<TABLE>
<CAPTION>
CAPITAL
First Fourth FIRST
Quarter Quarter QUARTER
1995 1995 1996
-------- -------- --------
<S> <C> <C> <C>
FOR THE QUARTER
Return on Average Common Stockholders'
Equity N/M 10.57% 11.89%
Return on Average Total Assets N/M .44% .49%
PER COMMON SHARE
Earnings (Loss):
Primary $ (2.11) $ 1.36 $ 1.52
Fully Diluted $ (2.11) $ 1.36 $ 1.51
Cash Dividends Declared $ 1.00 $ 1.00 $ 1.00
Market Price, End of Period $ 52.25 $ 66.50 $ 70.875
Book Value, End of Period (1) $ 50.04 $ 50.58 $ 51.06
COMMON SHARES (SHARES IN MILLIONS EXCEPT PAR VALUE)
Common stock $1 par value:
Authorized, at period end 300.000 300.000 300.000
Issued, at period end 83.679 83.679 83.679
Common stock in treasury, at period end 5.341 4.603 4.278
Average Common and Common Equivalent
Shares Outstanding-Primary (2) 78.346 81.322 80.896
Average Common and Common Equivalent
Shares Outstanding Assuming
Full Dilution (2) 78.346 81.415 81.560
CAPITAL RATIOS, END OF PERIOD
Common Stockholders' Equity to Total Assets 3.75% 3.96% 3.87%
Total Stockholders' Equity to Total Assets 4.35% 4.79% 4.67%
Bankers Trust New York Corporation:
Risk-Based Capital Ratios (3)
Tier 1 Capital 8.73% 8.51% 8.00%
Total Capital 14.20% 13.90% 13.10%
Leverage Ratio (3) 5.18% 5.12% 5.30%
Bankers Trust Company:
Risk-Based Capital Ratios (3)
Tier 1 Capital 9.33% 9.47% 9.15%
Total Capital 12.31% 12.78% 12.25%
Leverage Ratio (3) 5.27% 5.14% 5.50%
- --------------------------------------------------------------------------------------
</TABLE>
(1) This calculation includes the effect of the vested portion of
common shares issuable under deferred stock awards.
(2) Common stock equivalents are excluded from the first quarter 1995
as the effect would be anti-dilutive in calculating earnings per
share.
(3) Regulatory capital ratios at March 31, 1996 are preliminary.
N/M Not Meaningful.
9
<PAGE>
NONPERFORMING ASSETS AND ALLOWANCE FOR CREDIT LOSSES
<TABLE>
<CAPTION>
March 31, December 31, MARCH 31,
1995 1995 1996
---------- ------------- ----------
<S> <C> <C> <C>
Nonperforming assets (in millions)
- -------------------------------------------
Cash basis loans
Secured by real estate $ 403 $ 362 $ 351
Real estate related 26 23 31
Highly leveraged 111 153 132
Other 437 206 201
- ------------------------------------------- ------ ------ -----
Total cash basis loans $ 977 $ 744 $ 715
=========================================== ====== ====== =====
Renegotiated loans
Secured by real estate $ 90 $ 88 $ 89
Other nonrefinancing country 12 12 -
- ------------------------------------------- ------ ------ -----
Total renegotiated loans $ 102 $ 100 $ 89
=========================================== ====== ====== =====
Other real estate $ 265 $ 259 $ 257
=========================================== ====== ====== =====
Other nonperforming assets $ 66 $ 67 $ 67
=========================================== ====== ====== =====
First Fourth FIRST
Quarter Quarter QUARTER
1995 1995 1996
------ ------ -----
Allowance for credit losses (in millions)
- -------------------------------------------
Balance, beginning of period $1,252 $1,032 $ 992
Net charge-offs
Charge-offs 34 60 28
Recoveries 13 10 18
- ------------------------------------------- ------ ------ -----
Total net charge-offs* 21 50 10
Provision for credit losses 14 10 5
- ------------------------------------------- ------ ------ -----
Balance, end of period $1,245 $ 992 $ 987
=========================================== ====== ====== =====
*Components:
Secured by real estate $ 6 $ 11 $ 1
Real estate related 2 - 4
Highly leveraged 20 2 20
Other - 38 (12)
Refinancing country (7) (1) (3)
- ------------------------------------------- ------ ------ -----
Total $ 21 $ 50 $ 10
=========================================== ====== ====== =====
</TABLE>
10
<PAGE>
ORGANIZATIONAL UNITS
The Corporation delivers a wide range of financial products and services
worldwide principally through eight broad Organizational Units. Five units are
organized around specific products and services: Investment Banking, Risk
Management Products & Services, Trading & Sales, Investment Management, and
Client Processing Services. Three additional units are organized to deliver
these same types of financial products and services with the unique local
expertise necessary to operate successfully in Australia/New Zealand, Asia and
Latin America. The Units are described below:
Investment Banking: Delivers the Firm's full range of financing, advisory
------------------
and research products and services to corporate, financial institution and
investor clients. Services include the underwriting, distribution and trading
of public equity and debt (both investment grade and high-yield), private
placements and structured finance, as well as merger and acquisition advisory
services. The unit is responsible for the Firm's private equity investments.
The Corporation's Asset-Based Lending activities, although managed separately,
are included in Investment Banking for reporting purposes.
Risk Management Products & Services: Assists clients in the management of
-----------------------------------
their financial and economic risk. Products and services include interest rate,
currency, equity, commodity and credit derivatives, as well as risk management
advisory services. This business also manages the Corporation's risk associated
with client derivative transactions.
Trading & Sales: Provides financial products and services to the
---------------
Corporation's clients and enters into securities, currency, commodity,
derivatives and funding transactions on a proprietary basis. The unit is
responsible for funding the Corporation worldwide, including capital and
liquidity management.
Investment Management: Manages investments for pension funds, corporations
---------------------
and other institutional investors worldwide (the Australian funds management
business is reported in the results of Australia/New Zealand). Services
provided include management of equities, fixed income securities and other
financial instruments in many of the world's major financial markets. The
Corporation's Private Banking activities, although managed separately, are
included in Investment Management for reporting purposes.
Client Processing Services: Gathers, moves and manages assets for
--------------------------
institutional clients throughout the world. This unit delivers the
Corporation's processing, fiduciary and trust services, such as cash management,
custody and clearance, and deposit and credit services, to corporations,
financial institutions and governments and their agencies around the world. It
also provides retirement services, including
11
<PAGE>
recordkeeping and administrative services and portfolio measurement to sponsors
of U.S. defined benefit and defined contribution plans.
Geographically-Based Businesses:
Australia/New Zealand - Provides funds management and corporate finance, and
---------------------
financial markets services to local and international clients, and trades for
its own account in related markets.
Asia - Provides advisory and corporate finance services to financial
----
institutions, governments and both state-owned and privatized businesses. In
addition, it engages in arbitrage trading and equity investments.
Latin America - Engages in trading and distribution, organization and
-------------
underwriting of corporate finance securities, mergers and acquisitions services
and private equity investments. In addition, this organizational unit, through
its Chilean insurance subsidiaries, underwrites pension-related life and
disability insurance and sells pension-related life annuities.
Corporate Units include the unallocated costs of corporate staff together with
the notional interest income on the Corporation's capital accounts. The
Corporate unit also includes a residual portion of the Firm's loans to clients
not booked in the business units. In addition to the provision for credit
losses there are also various special charges and reserves reflected within
Corporate such as the previously disclosed severance charge taken in the first
quarter of 1995 and the derivative settlements in the fourth quarter of 1995.
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 the management views its business 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.
12
<PAGE>
Exhibit 99.3
<TABLE>
<CAPTION>
ANNUAL NET INCOME BY ORGANIZATION
- ---------------------------------
Unadjusted
($ millions and % of total)
A B C D E F G H I
ANNUAL - ($ MILLIONS) ANNUAL - % QTR
FY92 FY93 FY94 FY95 FY92 FY93 FY94 FY95 1Q96
------ ------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Investment Banking ($9) $ 97 $135 $326 (1%) 9% 22% 152% 56%
2 Risk Mgmt Products & Services 124 333 163 (74) 19 31 26 (34) 1
3 Trading & Sales 188 466 (95) 82 29 44 (15) 38 17
4 Investment Management 90 26 (30) (10) 14 2 (5) (5) 1
5 Client Processing Services 92 87 98 93 14 8 16 43 15
6 Australia / NZ 143 129 152 102 22 12 25 47 17
7 Asia 32 43 43 (19) 5 4 7 (9) 4
8 Latin America 43 147 109 (120) 7 14 18 (56) 14
9 Corporate (64) (258) 40 (165) (9) (24) 6 (76) (25)
------ ------- ------ ------ ------ ------ ------ ------ ------
10 Total $639 $1,070 $615 $ 215 100% 100% 100% 100% 100%
====== ======= ====== ====== ====== ====== ====== ====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY NET INCOME BY ORGANIZATION
- ------------------------------------
Unadjusted
($ millions)
A B C D E F G H I J K
Qtly Avgs Quarters 1994 Quarters 1995 Q96
----------- -------------------------- --------------------------- -------
FY92 FY93 1Q94 2Q94 3Q94 4Q94 1Q95 2Q95 3Q95 4Q95 1Q96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Investment Banking ($2) $24 $40 $39 $8 $48 $24 $74 $70 $158 $77
2 Risk Mgmt Products & Services 31 83 92 34 54 (17) (30) (9) 9 (44) 1
3 Trading & Sales 47 117 (73) 7 17 (46) 11 8 38 25 24
4 Investment Management 22 7 6 (2) (20) (14) (4) 2 (3) (5) 1
5 Client Processing Services 23 22 28 27 22 21 20 27 25 21 21
6 Australia / NZ 36 32 39 36 33 44 22 25 22 33 24
7 Asia 8 11 15 12 13 3 (3) 8 (14) (10) 6
8 Latin America 11 37 10 10 64 25 (108) (4) 3 (11) 19
9 Corporate (16) (65) 7 18 (22) 37 (89) (40) 5 (41) (35)
------ ------ ----- ----- ------ ----- ------ ----- ----- ------ ------
10 Total $160 $268 $164 $181 $169 $101 ($157) $91 $155 $126 $138
====== ====== ===== ===== ====== ===== ====== ===== ===== ====== ======
</TABLE>
