<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 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) October 22, 1998
BANKERS TRUST 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.)
130 LIBERTY STREET, NEW YORK, NEW YORK 10006
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (212) 250-2500
<PAGE>
Item 5. Other Events
A) On October 22, 1998, Bankers Trust Corporation (the
"Registrant") released financial information with respect to the
quarter ended September 30, 1998. This Current Report on Form 8-
K files the Press Release which contains certain financial
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 financial information contained in the
Registrant's Press Release dated October 22, 1998, is
described below and is incorporated herein by reference.
1. Review of certain financial information.
2. The unaudited consolidated financial position of
Bankers Trust Corporation and its subsidiaries at September 30,
1998, June 30, 1998 and September 30, 1997, the audited
consolidated financial position at December 31, 1997 and its
unaudited condensed consolidated results of operations for each
of the three-month and nine-month periods ended September 30,
1998, and September 30, 1997 and the three-month period ended
June 30, 1998.
In the opinion of the Registrant's management, all material
adjustments necessary for a fair presentation of the
Corporation's consolidated financial position at September 30,
1998, June 30, 1998, December 31, 1997 and September 30, 1997 and
its condensed consolidated results of operations for the three-
month and nine-month periods ended September 30, 1998 and
September 30, 1997 and the three-month period ended June 30, 1998
have been made. All such adjustments were of a normal recurring
nature. The results of operations for the three-month and nine-
month periods ended September 30, 1998 and for the three-month
period ended June 30, 1998 are not necessarily indicative of
operations for the full year or any other interim period.
B) In a meeting with investors and analysts on October 22,
1998, management noted that daily financial reports produced for
management information purposes reflect that the Corporation has
operated profitably thus far in October. Based on these reports
management noted that Investment Banking, Trading & Sales, Global
Institutional Services, Private Client Services, and
Australia/New Zealand/International Funds Management have been
operating profitably.
The daily management reports which are the source of this
management information are not audited, and the normal financial
statement closing processes, accruals, and reconciliations have
not been completed on these results.
The Corporation does not intend to update this information
or provide financial results on a monthly, or partial period
basis in the future.
<PAGE>
In addition, the following schedules were distributed at the
meeting:
- Preliminary Emerging Markets Cross Border Exposures at
September 30, 1998 is contained in Exhibit 99.2
- Adjusted ROCE by Organizational Unit is contained in
Exhibit 99.2
C) FORWARD LOOKING STATEMENTS
Certain sections of this report contain forward looking
statements and can be identified by the use of such words as
"anticipates," "expects," and "estimates," and similar
expressions. These statements are subject to certain risks and
uncertainties. These risks and uncertainties could cause actual
results to differ materially from the current statements. See
also "Important Factors Relating to Forward Looking Statements"
contained in the Corporation's Annual Report.
<PAGE>
Item 7. Financial Statements and Exhibits
(c) Exhibits
(99.1) Earnings Press Release of the Registrant dated
October 22, 1998.
(99.2) Preliminary Emerging Markets Cross Border
Exposures at September 30, 1998
(99.2) Adjusted ROCE by Organizational Unit
(99.3) Certificate of Amendment of the Certificate of
Incorporation of Bankers Trust Corporation
<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 CORPORATION
By /s/ DAVID C. FISHER
DAVID C. FISHER
Controller and Principal
Accounting Officer
October 23, 1998
<PAGE>
BANKERS TRUST CORPORATION
FORM 8-K DATED OCTOBER 22, 1998
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
(99.1) Earnings Press Release of the Registrant dated
October 22, 1998.
(99.2) Preliminary Emerging Markets Cross Border Exposures
at September 30, 1998
(99.2) Adjusted ROCE by Organizational Unit
(99.3) Certificate of Amendment of the Certificate of
Incorporation of Bankers Trust Corporation
THURSDAY, OCTOBER 22, 1998
BANKERS TRUST REPORTS THIRD QUARTER RESULTS
New York, October 22, 1998 -- Bankers Trust Corporation (BT)
today reported a loss of $488 million, or $4.98 loss per share,
in the third quarter of 1998. In the third quarter of 1997, the
Corporation earned $246 million, or $2.19 net income per share.
Frank Newman, chairman of the board and chief executive officer,
said: "This quarter's disappointing net loss occurred during one
of the most severe global market dislocations in the post-World
War II period. Equity markets declined, risk premiums in debt
markets widened, and investment banking activity slowed markedly.
Bankers Trust sustained significant losses in emerging market
debt, high-yield debt and in our equity holdings. These losses
were only partially offset by positive results in our more stable
businesses -- Australia/New Zealand/International Funds
Management, Global Institutional Services, and the Private Client
Services Group.
"To succeed in this challenging environment, Bankers Trust has
accelerated actions to reduce the Firm's risk profile and
launched an aggressive cost-reduction program. In Emerging
Markets, we have reduced cross-border exposures to approximately
4% of total assets from 8% at the beginning of the year. Our
emerging market activities will be folded into our core
businesses and will no longer operate as a separate business
unit.
"Our expense-reduction goal is to lower annual base operating
costs by $300 million or 8% annually. This program will
emphasize lowering costs in businesses where we foresee reduced
capital flows and on generally improving the efficiency of the
Firm. It will have only a minimal impact on our more stable
businesses, where we see continued opportunity for growth.
"Despite this quarter's loss, Bankers Trust remains well
capitalized, with a strong balance sheet. I am confident that we
have the necessary resources and have taken the right action to
weather current market conditions. We will continue to ensure
that we are strongly positioned to provide our clients with the
highest quality service across the full range of our
capabilities.
Trading and securities losses for the quarter, including trading-
related net interest income and losses on securities available
for sale, were $409 million. These losses are primarily
attributable to charges to reduce Bankers Trust's exposure to
Russian Federation securities to 10% of face value, mark-to-
market losses on high-yield securities reflecting widening credit
spreads, and losses in global equity activities caused by
increased market volatility. In addition, due to uncertainties
in Emerging Markets, primarily Asia, the Corporation recorded a
$110 million provision for credit losses. Finally, the third
quarter results were reduced by mark-to-market losses on
investments in the Firm's private equity portfolio.
At September 30, 1998, total cash basis loans were $257 million,
unchanged from June 30, 1998 and down from $298 million at
September 30, 1997. Other nonperforming assets (primarily
trading) at September 30, 1998 were $375 million, down from $447
million at June 30, 1998 and up from $5 million at September 30,
1997. The decrease in the current quarter was primarily due to
charge-offs. At September 30, 1998, the Corporation's Emerging
Markets cross- border exposures to Asia, Latin America and Russia
were $6.6 billion, down 44% from $11.8 billion at December 31,
1997.
In light of recent public attention surrounding hedge funds, the
Corporation is providing the following information about its
hedge fund activities. The amount owed to the Firm by hedge
funds under foreign exchange and derivative contracts was $834
million at September 30, 1998. This entire amount is under daily
mark-to-market agreements that require cash or U.S. Treasury
securities as collateral. All collateral calls under these
agreements have been met. In addition, outstanding loans and
commitments to hedge funds not covered by
2
collateral agreements were approximately $40 million. The
Corporation made a $300 million equity investment in Long-Term
Capital Management, L.P. in connection with the recent
recapitalization of that entity. In addition, the Corporation
has approximately $225 million of proprietary equity investments
in approximately 50 other hedge funds with no single investment
larger than $20 million. The Corporation also finances trading
positions for hedge funds through reverse repurchase agreements,
all of which are fully collateralized. Also the Corporation
structures for other clients, principally large pension funds,
certain transactions that facilitate their investments in hedge
funds. The Corporation's credit risk in these structures lies
with the client investor and not with the hedge fund.
Management is implementing a cost-reduction program across the
Firm, with the goal of achieving a $300 million reduction in
annual base operating expenses. Base operating expenses exclude
performance-based incentives and provisions for policyholder
benefits. The program will target all costs, but will focus
primarily on personnel and agency and professional service costs.
The program should be fully phased in within 12 months with most
actions taken by the 1999 first quarter. In order to accomplish
these expense reductions, it is expected that a restructuring
charge will be incurred in the 1998 fourth quarter.
As of September 30, 1998, the Corporation estimates that its
ratios of Tier 1 Capital and Total Capital to risk-weighted
assets were 7.06% and 13.28%, respectively. These ratios
continue to exceed the regulatory standard for well-capitalized
banking organizations of 6% and 10%, respectively. The Tier 1
Capital ratio declined 108 basis points and the Total Capital
ratio declined 95 basis points from June 30, 1998. The primary
cause for these declines was the impact on Tier 1 Capital and on
Total Capital of the net loss for the third quarter. This impact
was partially offset by a significant reduction in risk-weighted
assets.
3
The Corporation's third quarter 1998 Leverage ratio is estimated
to be 2.94%, a decrease of 73 basis points from the 1998 second
quarter. This decrease was caused by the aforementioned decline
in Tier 1 Capital combined with a quarterly average assets figure
that includes higher balances in place early in the third
quarter. The Leverage ratio calculated using period-end assets
was 3.30%.
Separately, the Corporation's primary banking subsidiary, Bankers
Trust Company, estimates that its ratios for Tier 1 Capital and
Total Capital to risk-weighted assets were 10.53% and 14.68%,
respectively, at September 30, 1998. These ratios are well above
the regulatory standards for well-capitalized depository
institutions of 6% and 10%, respectively. Additionally, Bankers
Trust Company estimates that its Leverage ratio for the 1998
third quarter is 5.32%.
4
ORGANIZATIONAL HIGHLIGHTS*
Total Non- Pretax Net
Third Quarter 1998 Total Interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
Investment Banking $ 153 $ 358 $(205) $(142)
Trading & Sales 7 147 (140) (97)
Global Institutional Services 256 216 40 28
Private Client Services Group 165 136 29 20
Australia/New Zealand/Int'l
Funds Mgmt 163 108 55 38
Emerging Markets Group:
Latin America 49 131 (82) (56)
Emerging Europe, Mid East
& Africa (198) 16 (214) (148)
Asia (122) 30 (152) (105)
Corporate/Other (2) 36 (38) (26)
Total $ 471 $1,178 $(707) $(488)
Total Non- Pretax Net
Second Quarter 1998 Total Interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
Investment Banking $ 560 $ 433 $ 127 $ 91
Trading & Sales 244 144 100 72
Global Institutional Services 262 233 29 21
Private Client Services Group 193 157 36 26
Australia/New Zealand/Int'l
Funds Mgmt 162 115 47 34
Emerging Markets Group:
Latin America 84 127 (43) (30)
Emerging Europe, Mid East
& Africa 29 26 3 2
Asia 8 42 (34) (25)
Corporate/Other 6 43 (37) (27)
Total $1,548 $1,320 $ 228 $164
Total Non- Pretax Net
Third Quarter 1997 Total Interest Income/ Income/
(in millions) Revenue Expenses (Loss) (Loss)
Investment Banking $ 650 $ 428 $ 222 $157
Trading & Sales 132 119 13 9
Global Institutional Services 243 229 14 10
Private Client Services Group 177 158 19 13
Australia/New Zealand/Int'l
Funds Mgmt 140 116 24 17
Emerging Markets Group:
Latin America 204 141 63 44
Emerging Europe, Mid East
& Africa 42 32 10 7
Asia 39 50 (11) (8)
Corporate/Other 143 146 (3) (3)
Total $1,770 $1,419 $351 $246
* 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 diverse 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 judgments have been made to apportion revenue and expense
items. In addition, certain revenue and expenses have been
segregated and reported in Corporate/Other because, in the
opinion of management, they could not be reasonably allocated or because
their contributions to a particular organizational
unit would be distortive. In order to provide comparability
from one period to the next, the Corporation will generally restate this
analysis to conform with material changes in the
allocation process and/or significant changes in organizational structure.
5
Organizational Unit Results
The Investment Banking business recorded a net loss of $142
million in the third quarter of 1998 compared to net income of
$157 million in the prior year quarter and net income of $91
million in the second quarter of 1998. The current quarter
included losses related to widening credit spreads on high-yield
debt securities and mark-to-market losses on investments in the
unit's private equity portfolio. In addition, corporate finance
activity declined from the previous quarters due to the poor
market environment. The second quarter of 1998 included charges
related to repositioning of European equity businesses,
consisting of valuation adjustments to Bankers Trust's trading
assets and integration costs associated with the acquisition of
NatWest Markets' European equities business.
Trading & Sales recorded a net loss of $97 million in the third
quarter of 1998, compared to net income of $9 million in the 1997
third quarter and net income of $72 million in the previous
quarter. Despite the difficult market environment, this unit
produced positive revenue during the third quarter of 1998
primarily due to strong client-related activities. The current
quarter also reflected losses attributable to widening credit
spreads and increased market volatility in global equity markets
during the quarter.
Global Institutional Services contributed $28 million of net
income in the third quarter of 1998, up $18 million from the 1997
third quarter and up $7 million from the previous quarter. As
compared to the prior year period, the third quarter of 1998
included improved revenue from corporate trust and agency
services and cash management services.
The Corporation's Private Client Services Group business recorded
net income of $20 million for the current quarter, up $7 million
from the prior year period and down $6 million from the previous
quarter. Lower U.S. private client commissions were a major
contributor to the decline from the second quarter of 1998.
Net income of the Australia/New Zealand/International Funds
Management business was $38 million in the third quarter of 1998,
up $21 million from the third quarter of 1997 and up $4 million
from the previous quarter despite a decline in Australian
dollar/US dollar exchange rates. If the effects of Australian
dollar depreciation are excluded, performance would be better by
an additional $3 million when compared to the third quarter of
1997 and $2 million when compared to the previous quarter. The
current quarter's improvement was largely due to a strong
performance by the Australian and New Zealand Sales and Trading
group. As compared to the previous quarter, trading results were
offset in part by lower corporate finance fees.
Emerging Markets Group net loss was $309 million in the current
quarter, compared to net income of $43 million in the prior year
period and a net loss of $53 million in the second quarter of
1998. The net loss was primarily attributable to Russia and
deteriorating credit conditions in Asia.
Latin America - Trading losses and losses on securities
available for sale negatively impacted the current quarter and
the second quarter of 1998. The prior year's quarter included an
after-tax gain of $20 million resulting from the completion of
the final stage on the sale of 50% of the Corporation's stake in
Consorcio, a Chilean insurance company.
6
Emerging Europe, Middle East & Africa - The current quarter
included charges to reduce the carrying amount of exposure to
Russian Federation securities to 10% of face value. This unit
also recorded a $20 million provision for credit losses in the
third quarter of 1998.
Asia - The current quarter included a $90 million provision for
credit losses, losses on securities available for sale and lower
trading revenue. The second quarter of 1998 reflected both the
impact of a $60 million provision for trading-related credit
losses as well as valuation adjustments to trading assets.
Corporate/Other includes the income and expenses of smaller
businesses that are not included in the main organizational units
as well as some activities not associated with specific business
lines. It also includes the funding benefit attributed to the
Corporation's capital related to these areas. Corporate/Other
net loss was $26 million in the third quarter of 1998, compared
with a net loss of $3 million in the third quarter of 1997 and a
net loss of $27 million in the second quarter of 1998.
QUARTERLY FINANCIAL COMPARISONS
Third Quarter 1998 Versus Third Quarter 1997
Net loss for the third quarter of 1998 was $488 million as
compared to $246 million of net income earned in the third
quarter of 1997. The results for the third quarter of 1998,
which were significantly affected by turmoil in global and equity
markets, include trading losses, losses on securities available
for sale, and a $110 million provision for credit losses.
Third quarter 1998 combined trading revenue and trading-related
net interest revenue before the provision for trading-related
credit losses was a loss of $284 million, a decrease of $776
million from the third quarter of 1997. The decline is primarily
attributable to mark-to-market losses on high-yield securities,
losses in global proprietary equity portfolios and Russian
related trading losses. Page 12 shows combined trading results
by organizational unit.
Fiduciary and funds management revenue was $273 million in the
third quarter of 1998, down $4 million from the prior year
period. The current quarter reflected lower client processing
fees and lower performance-based fees offset partly by higher
global private banking commissions. At September 30, 1998,
assets under management were $357 billion compared to $302
billion at September 30, 1997.
Difficult market conditions affected corporate finance fees,
which were down 21% from the third quarter of 1997. Lower
underwriting and loan syndication fees were offset partly by
higher merger and acquisition fees.
Other fees and commissions of $218 million increased $60 million
from the prior year quarter. Increased customer trading activity
primarily due to the acquisition of NatWest Markets' European
equities business resulted in higher fees for brokerage services.
Net revenue from equity investments decreased $74 million from
the prior year period resulting from the poor market environment.
7
Securities available for sale losses totaled $125 million
compared to securities available for sale gains of $18 million in
the prior year period. The current quarter included other-than-
temporary impairment writedowns on Russian, Asian and Latin
American debt securities.
Other noninterest revenue was a negative $35 million compared to
$171 million in the prior year period. The current quarter
included losses from mark-to-market adjustments on venture
capital equity securities. Included in the results of the third
quarter of 1997 was a pre-tax gain of $76 million on the sale of
280 Park Avenue, a midtown Manhattan office building, as well as
the remaining gain resulting from the completion of the final
stage in the sale of 50% of the Corporation's stake in Consorcio.
As compared to the third quarter of 1997, salaries and
commissions expense increased $33 million, or 10%, primarily due
to an increase in the average number of employees.
Incentive compensation and employee benefits decreased $257
million, or 47%, from the prior year quarter due to the decline
in financial performance.
During the third quarter of 1997, the Corporation recognized $57
million in pre-tax restructuring charges associated with the
merger with Alex. Brown, such as severance, lease terminations
and direct costs of completing the merger.
Third Quarter 1998 versus Second Quarter 1998
Net loss for the third quarter of 1998 was $488 million as
compared to $164 million of net income earned in the second
quarter of 1998. The results for the third quarter of 1998,
which were significantly affected by turmoil in global and equity
markets, include trading losses, losses on securities available
for sale and a $110 million provision for credit losses.
Third quarter 1998 combined trading revenue and trading-related
net interest revenue before the provision for trading-related
credit losses was a loss of $284 million. This was a decrease of
$526 million from the second quarter of 1998. The decline is
primarily attributable to mark-to-market losses on high-yield
securities, losses in global proprietary equity portfolios and
Russian related trading losses. Page 12 shows combined trading
results by organizational unit.
Fiduciary and funds management revenue was $273 million in the
third quarter of 1998, down $12 million from the second quarter
of 1998. The decrease was primarily due to lower global private
banking commissions and lower performance-based fees. At
September 30, 1998, assets under management were approximately
$357 billion compared to $365 billion at June 30, 1998.
Difficult market conditions affected corporate finance fees,
which were down $150 million from the second quarter of 1998.
Underwriting fees and loan syndication fees declined from the
previous quarter.
Other fees and commissions of $218 million increased $12 million
from the second quarter of 1998. Increased customer trading
activity primarily due to the acquisition of NatWest Markets'
European equities business resulted in higher fees for brokerage
services.
8
Net revenue from equity investments decreased $74 million from
the previous quarter. The poor market environment affected the
current quarter.
Securities available for sale losses totaled $125 million as
compared to securities available for sale gains of $50 million in
the previous quarter. The current quarter reflected other-than-
temporary impairment writedowns on Russian, Asian and Latin
American debt securities.
Insurance premiums revenue increased $15 million, or 25%, mainly
due to higher revenue from new annuity sales.
Other noninterest revenue was a negative $35 million in the
current quarter, compared to $80 million in the prior quarter.
The current quarter included losses from mark-to-market
adjustments on venture capital equity securities.
Incentive compensation and employee benefits decreased $131
million due to the decline in financial performance.
Agency and other professional service fees decreased $25 million,
or 17%, from the previous quarter. The second quarter of 1998
included integration costs associated with the acquisition of
NatWest Markets' European equities business.
The remainder of this release contains the following tables:
Page
1. BTC Condensed Consolidated Quarterly Statement
of Income 10
2. BTC Condensed Consolidated Year-To-Date Statement
of Income 11
3. Combined Trading Revenue and Trading-Related Net
Interest Revenue 12
4. Net Interest Revenue 12
5. BTC Consolidated Balance Sheet 13
6. Stock and Capital Data 14
7. Nonperforming Assets and Allowance for Credit Losses 15
8. Emerging Markets Cross-Border Exposures 16
For additional information, contact William McBride, 212-250-7961.
Bankers Trust news releases, including quarterly results, are
available on the Internet (http://www.bankerstrust.com/earnings).
9
BANKERS TRUST CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED QUARTERLY STATEMENT OF INCOME
(in millions, except per share data)
(unaudited)
Third Second Third
Quarter Quarter Quarter
1997 1998 1998
REVENUE
Net interest revenue $ 315 $ 366 $ 336
Trading revenue* 387 97 (401)
Credit loss provision-loans - - (20)
Credit loss provision-trading (10) (60) (90)
Fiduciary & funds management 277 285 273
Corporate finance fees 305 392 242
Other fees & commissions 158 206 218
Net revenue from equity investments 73 73 (1)
Securities available for sale
gains (losses) 18 50 (125)
Insurance premiums 76 59 74
Other 171 80 (35)
Total revenue 1,770 1,548 471
EXPENSES
Salaries and commissions 333 361 366
Incentive compensation &
employee benefits 543 417 286
Agency & other professional
service fees 105 147 122
Communication & data services 58 61 65
Occupancy, net 45 54 56
Furniture & equipment 55 56 65
Travel & entertainment 36 42 44
Provision for policyholder benefits 90 74 92
Other 97 108 82
Restructuring charges 57 - -
Total expenses 1,419 1,320 1,178
Income (loss) before income taxes 351 228 (707)
Income taxes (benefit) 105 64 (219)
NET INCOME (LOSS) $ 246 $ 164 $ (488)
NET INCOME (LOSS) APPLICABLE
TO COMMON STOCK $ 235 $ 155 $ (494)
Cash dividends declared per common share $1.00 $1.00 $1.00
EARNINGS (LOSS) PER COMMON SHARE:
BASIC $2.33 $1.54 $(4.98)
DILUTED $2.19 $1.46 $(4.98)
* The Corporation accounts for revenue from a wide range of
business activities as "trading". See table on page 12.
Certain prior period amounts have been reclassified to conform
to the current presentation.
10
BANKERS TRUST CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED YEAR-TO-DATE STATEMENT OF INCOME
(in millions, except per share data)
(unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 1997 1998
REVENUE
Net interest revenue $ 986 $1,104
Trading revenue* 1,013 (53)
Credit loss provision-loans - (20)
Credit loss provision-trading (10) (210)
Fiduciary & funds management 775 819
Corporate finance fees 789 965
Other fees & commissions 439 584
Net revenue from equity investments 129 203
Securities available for sale
gains (losses) 100 (81)
Insurance premiums 203 202
Other 277 139
Total revenue 4,701 3,652
EXPENSES
Salaries and commissions 941 1,063
Incentive compensation & employee benefits 1,362 1,200
Agency & other professional service fees 296 374
Communication & data services 173 180
Occupancy, net 132 156
Furniture & equipment 163 175
Travel & entertainment 101 123
Provision for policyholder benefits 231 251
Other 292 301
Restructuring charges 57 -
Total expenses 3,748 3,823
Income (loss) before income taxes 953 (171)
Income taxes (benefit) 294 (69)
NET INCOME (LOSS) $ 659 $ (102)
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK $ 622 $ (128)
Cash dividends declared per common share $3.00 $3.00
EARNINGS (LOSS) PER COMMON SHARE:
BASIC $6.20 $(1.28)
DILUTED $5.85 $(1.28)
* The Corporation accounts for revenue from a wide range of
business activities as "trading". See table on page 12.
Certain prior period amounts have been reclassified to conform
to the current presentation.
11
COMBINED TRADING REVENUE AND TRADING-RELATED NET INTEREST REVENUE
The Corporation views trading revenue and trading-related net
interest revenue (NIR) together, as presented in the table below.
Third Second Third
Quarter Quarter Quarter
(in millions) 1997 1998 1998
Trading Revenue* $387 $97 $(401)
Trading-Related Net Interest
Revenue (Estimate) 105 145 117
Total Trading Revenue &
Trading-Related NIR $492 $242 $(284)
By Organizational Unit (in millions)
Investment Banking $161 $(84) $(192)
Trading & Sales 106 206 (46)
Global Institutional Services 2 2 1
Private Client Services Group 4 4 15
Australia/New Zealand/Int'l Funds Mgmt 31 41 63
Emerging Markets Group:
Latin America 24 (17) (45)
Emerging Europe, Middle East & Africa 44 36 (73)
Asia 95 52 (9)
Corporate/Other 25 2 2
Total Trading Revenue &
Trading-Related NIR $492 $242 $(284)
* Before provision for trading-related credit losses.
Note: The Corporation accounts for revenue from a wide range of
business activities as "trading". Investment Banking produces
trading revenue in secondary market activities with clients,
primarily in sectors where the Firm also serves as underwriter.
A small portion of trading revenue arises from private equity
investments that are accounted for on a mark-to-market basis.
Trading & Sales produces trading revenue through proprietary
position-taking, including arbitrage, new derivative transactions
with clients, as well as market making and other client
activities. Australia/New Zealand/Int'l Funds Mgmt and Emerging
Markets Group produce trading revenue from all the above business
activities. Corporate/Other includes various transactions which,
for management accounting purposes, are not recorded in
Organizational Units.
NET INTEREST REVENUE
Third Second Third
Quarter Quarter Quarter
($ in millions) 1997 1998 1998
Nontrading-related net interest
revenue(Estimate) $210 $221 $219
Trading-related net interest
revenue (Estimate) 105 145 117
Net interest revenue $315 $366 $336
Average rates (fully taxable basis)
Yield on interest-earning assets 6.74% 6.95% 6.91%
Cost of interest-bearing liabilities 5.72% 5.99% 5.99%
Interest rate spread 1.02% .96% .92%
Net interest margin 1.21% 1.12% 1.04%
Average balances ($ in billions)
Loans $19.0 $22.5 $23.2
Total interest-earning assets $105.7 $133.4 $131.3
Total assets $139.8 $173.9 $175.6
Total interest-bearing liabilities $102.2 $129.9 $128.9
12
BANKERS TRUST CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in millions)
September 30 December 31 June 30 September 30
1997* 1997 1998* 1998*
ASSETS
Cash and due from banks $ 1,625 $ 2,188 $ 2,221 $ 2,405
Interest-bearing
deposits in banks 2,522 4,272 1,645 2,208
Federal funds sold 2,241 1,382 3,445 4,662
Sec. purch. under
resale agreements 24,902 19,163 27,327 21,752
Securities borrowed 16,138 16,751 25,634 19,692
Trading assets:
Government securities 11,650 11,397 11,342 9,398
Corporate debt securities 9,362 8,128 10,375 7,626
Equity securities 8,010 7,914 11,190 7,408
Swaps, options & other
derivatives*** 13,520 17,673 16,167 19,083
Other trading assets 9,833 11,460 14,375 14,867
Total trading assets 52,375 56,572 63,449 58,382
Securities available
for sale 7,577 8,081 12,105 11,421
Loans*** 20,544 19,106 22,233 21,723
Customer receivables 1,711 1,547 1,701 1,709
Accounts receivable &
accrued interest 3,977 4,785 6,351 5,542
Other assets 6,275 6,255 6,200 6,771
Total $139,887 $140,102 $172,311 $156,267
LIABILITIES
Noninterest-bearing deposits
Domestic offices $ 2,134 $ 2,776 $ 3,314 $ 2,885
Foreign offices 1,294 1,952 1,717 2,330
Interest-bearing deposits
Domestic offices 20,490 22,353 24,180 20,022
Foreign offices 22,161 15,749 17,332 16,054
Total deposits 46,079 42,830 46,543 41,291
Trading liabilities:
Securities sold,
not yet purchased
Government securities 6,724 4,389 10,265 8,640
Equity securities 5,445 5,273 8,650 8,814
Other trading liabilities 407 519 581 969
Swaps, options &
other derivatives 13,517 17,065 15,271 16,731
Total trading liabilities 26,093 27,246 34,767 35,154
Securities loaned and
securities sold under
repurchase agreements 20,158 17,896 26,057 22,973
Other short-term borrowings 19,329 19,577 27,049 20,264
Accounts payable and
accrued expenses 6,255 6,536 5,866 5,289
Other liabilities*** 3,798 4,250 6,250 6,011
Long-term debt not
included in risk-based
capital 7,655 11,275 15,091 15,631
Long-term debt included in
risk-based capital 2,918 3,312 3,351 3,221
Trust preferred
capital securities** 1,471 1,472 1,474 1,419
Total liabilities 133,756 134,394 166,448 151,253
PREFERRED STOCK
OF SUBSIDIARY - - 304 304
STOCKHOLDERS' EQUITY
Preferred stock 703 658 493 394
Common stock 105 105 105 105
Capital surplus 1,541 1,563 1,607 1,610
Retained earnings 4,176 4,202 4,240 3,614
Common stock in treasury,
at cost (545) (889) (985) (1,118)
Other stockholders' equity 422 463 545 573
Accumulated other
comprehensive income:
Net unrealized gains
(losses) on securities
available for sale,
net of taxes 86 (32) (66) (87)
Foreign currency
translation, net
of taxes (357) (362) (380) (381)
Total stockholders' equity 6,131 5,708 5,559 4,710
Total $139,887 $140,102 $172,311 $156,267
* Unaudited
** Mandatorily redeemable capital securities of subsidiary
trusts holding solely junior subordinated deferrable interest
debentures included in risk-based capital
*** See table on page 15 for allocation of the allowance for
credit losses.
Certain prior period amounts have been reclassified to conform to
the current presentation.
13
STOCK AND CAPITAL DATA
Third Second Third
Quarter Quarter Quarter
1997 1998 1998
FOR THE QUARTER
Return on Average Common
Stockholders' Equity 17.4% 12.1% N/M
Return on Average Total Assets .70% .38% N/M
PER COMMON SHARE
Earnings (Loss):
Basic $2.33 $1.54 $(4.98)
Diluted $2.19 $1.46 $(4.98)
Cash Dividends Declared $1.00 $1.00 $1.00
Market Price, End of Period $122.38 $116.06 $59.00
Book Value, End of Period $51.65 $49.27 $43.51
COMMON SHARES (shares in thousands except par value)
Common stock $1 par value:
Authorized, at period end 300,000 300,000 300,000
Issued, at period end 105,362 105,380 105,380
Common stock in treasury,
at period end 5,757 8,903 10,177
Average Common and Common Equivalent
Shares Outstanding
Basic 100,773 100,949 99,299
Diluted 107,449 106,645 99,299(2)
CAPITAL RATIOS, END OF PERIOD
Common Stockholders' Equity to
Total Assets 3.9% 2.9% 2.8%
Total Stockholders' Equity to
Total Assets 4.4% 3.2% 3.0%
Bankers Trust Corporation:
Risk-Based Capital Ratios (1)
Tier 1 Capital 8.44% 8.14% 7.06%
Total Capital 13.55% 14.23% 13.28%
Leverage Ratio (1) 4.90% 3.67% 2.94%
Bankers Trust Company:
Risk-Based Capital Ratios (1)
Tier 1 Capital 8.71% 9.46% 10.53%
Total Capital 12.15% 13.48% 14.68%
Leverage Ratio (1) 5.32% 5.24% 5.32%
N/M Not Meaningful.
(1) Regulatory capital ratios at September 30, 1998 are
preliminary. The risk-based capital ratios have been calculated
under the new market risk amendment to the risk-based capital guidelines.
(2) Due to a loss for the period, no incremental shares are
included in the EPS calculation because the effect would be antidilutive.
14
NONPERFORMING ASSETS AND ALLOWANCE FOR CREDIT LOSSES
(in millions)
September 30 June 30 September 30
1997 1998 1998
Nonperforming assets
Cash basis loans
Secured by real estate $140 $104 $ 96
Real estate related 25 14 14
Highly leveraged 56 23 57
Other 77 116 90
Total cash basis loans $298 $257 $257
Renegotiated loans $37 $26 $26
Other real estate $190 $187 $122
Other nonperforming assets
(primarily trading) $5 $447 $375
Total allowance for credit losses
Balance, beginning of quarter $973 $1,006 $1,011
Net charge-offs
Charge-offs
Loans 17 23 37
Trading assets 13 38 115
Total charge-offs 30 61 152
Recoveries
Loans 3 6 6
Trading assets 16 - -
Total recoveries 19 6 6
Total net charge-offs 11 55 146
Credit loss provision-loans - - 20
Credit loss provision-trading 10 60 90
Total credit loss provision 10 60 110
Balance, end of quarter (a) $972 $1,011 $ 975
(a) Allocation of allowance
for credit losses*:
Loans $759 $ 678 $667
Trading assets 200 320 295
Other liabilities 13 13 13
Balance, end of quarter $972 $1,011 $975
* The Corporation believes that the total allowance for credit
losses is available for credit losses in its entire portfolio,
which is comprised of loans, credit-related commitments,
derivatives and other financial instruments. Due to a
multitude of complex and changing factors that are collectively
weighed in determining the adequacy of the allowance for credit
losses, management expects that the allocation of the total
allowance for credit losses may be adjusted as risk factors change.
15
EMERGING MARKETS CROSS-BORDER EXPOSURES(1)
($ in billions)
% Change from
December 31, September 30, December 31,
1997 1998 1997
Korea, Republic of $1.6 $1.0 (38)%
Indonesia 1.3 0.6 (54)%
Hong Kong 1.0 0.3 (70)%
Thailand 0.6 0.3 (50)%
Malaysia 0.3 0.1 (67)%
Other(2) 1.1 1.0 (9)%
Total Emerging Asia $5.9 $3.3 (44)%
Brazil $1.9 $0.9 (53)%
Mexico 1.0 0.8 (20)%
Argentina 0.8 0.6 (25)%
Venezuela 0.3 0.1 (67)%
Other(3) 0.8 0.6 (25)%
Total Latin America $4.8 $3.0 (38)%
Russian Federation $1.1 $0.3 (73)%
Total $11.8 $6.6 (44)%
As % of Total Assets 8.4% 4.2%
(1) Based on FFIEC instructions. Shown by country of ultimate
risk. Excludes local country claims on local residents.
(2) Includes Peoples Republic of China, Republic of Taiwan,
India, Philippines, Singapore and Sri Lanka.
(3) Includes Chile, Colombia, Peru, Ecuador, Nicaragua, Panama
and Uruguay.
16
BANKERS TRUST CORPORATION
130 LIBERTY STREET
NEW YORK, NEW YORK 10006
David C. Fisher
Controller and Principal
Accounting Officer
October 23, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
Accompanying this letter is Bankers Trust Corporation's
Report on Form 8-K dated October 22, 1998 (the "Form 8-K"). The
Form 8-K is being filed electronically through the EDGAR System.
If there are any questions or comments in connection with
the enclosed filing, please contact the undersigned at 212-250-
3681.
Very truly yours,
BANKERS TRUST CORPORATION
By: DAVID C. FISHER
DAVID C. FISHER
Controller and Principal
Accounting Officer
<PAGE>
EXHIBIT 99.2
Emerging Markets Cross Border Exposures(1)
September 30, 1998
($ billions)
PRELIMINARY
<TABLE>
<CAPTION>
9/30/98
Total
Deriva- Cross
Trade Trading/ tives/ Commit- Border
Finance Other(2) FX Loans ments Exposure
<S> <C> <C> <C> <C> <C> <C>
Korea, Republic of $0.1 $0.3 $0.4 $0.1 $0.1 $1.0
Indonesia - 0.1 0.5 - - 0.6
Hong Kong - 0.1 0.2 0.1 - 0.3
Thailand - - 0.2 - - 0.3
Malaysia - - - - - 0.1
Other(3) 0.1 0.3 0.4 0.2 - 1.0
Total Emerging Asia $0.3 $0.8 $1.8 $0.4 $0.1 $3.3
Brazil $0.3 $0.4 $ - $0.1 $0.1 $0.9
Mexico 0.1 0.3 0.1 0.2 0.2 0.8
Argentina - 0.4 - 0.1 0.1 0.6
Venezuela - - - 0.1 - 0.1
Other(4) 0.2 0.2 - 0.2 - 0.6
Total Latin America $0.6 $1.4 $0.1 $0.6 $0.4 $3.0
Russian Federation $ - $ - $0.1 $0.2 $ - $0.3
Total $0.9 $2.2 $1.9 $1.2 $0.5 $6.6
<FN>
(1) Based on FFIEC instructions, shown by country of ultimate risk. First
five columns represent management's view of types of claims. Excludes
local country claims on local residents. Numbers may not total due to
rounding differences.
(2) Includes securities, deposits and other exposures.
(3) Includes Peoples Republic of China, Republic of Taiwan, India,
Philippines, Singapore & Sri Lanka.
(4) Includes Chile, Colombia Peru, Ecuador, Nicaragua, Panama and Uruguay.
</TABLE>
<PAGE>
EXHIBIT 99.2
Adjusted ROCE by Organizational Unit
($ millions)
YTD 1998 Estimated
Adj. Net Common Estimated
Income Equity ROCE
Investment Banking $ 190 $2,141 11%
Trading & Sales 38 782 6
Global Institutional Services 68 260 34
Private Client Services 63 138 61
Australia/NZ/Int'l Funds Mgmt 99 243 54
Emerging Markets Group (411) 1,169 N/M
Corporate/Other (85) 260 N/M
Total $ (38) $4,993 N/M
Excludes the following "special items"
(after-tax):Investment Banking -
Impact of European equity repositioning
including NatWest acquisition $(64)
Exhibit 99.3
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
BANKERS TRUST CORPORATION
_____________
Under Section 805 of the Business Corporation Law
_____________
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively
a Senior Vice President and an Assistant Secretary of Bankers
Trust Corporation, hereby certify that:
FIRST: The name of the corporation is Bankers Trust
Corporation and the name under which it was formed was BT New
York Corporation.
SECOND: The certificate of incorporation of the
corporation was filed by the Department of State of New York on
the 12th day of May, 1965.
THIRD: The certificate of incorporation, as previously
amended and supplemented by certificates filed pursuant to law,
is hereby amended, pursuant to authority thereby vested in the
Board of Directors, to decrease the number of preferred shares of
each of the following series of Series Preferred Stock, no shares
of which series are currently outstanding, to zero:
(a) the Fixed/Adjustable Rate Cumulative Preferred Stock,
Series D;
(b) the Money Market Cumulative Preferred Stock, Series E,
Series F, Series G and Series H;
(c) the 8.55% Cumulative Preferred Stock. Series I;
(d) the Fixed/Adjustable Rate Cumulative Preferred Stock,
Series J;
(e) the Auction Rate Cumulative Preferred Stock ($100,000
Liquidation Preference), Series K, Series L, Series M
and Series N;
(f) the 7 5/8% Cumulative Preferred Stock, Series O;
(g) the 7.50% Cumulative Preferred Stock, Series P.
FOURTH: None of the authorized shares of any such series
of Series Preferred Stock are presently outstanding and none will
be issued subject to the certificate of incorporation, and, when
this certificate becomes accepted for filing, it shall have the
effect of eliminating from the certificate of incorporation
paragraphs (e), (f), (g), (h), (i), (j), and (j) of the Article
FOURTH of the certificate of incorporation, which paragraphs
contain all matters set forth in the certificate of incorporation
with respect to such series of Series Preferred Stock.
FIFTH: The manner in which the foregoing amendment of the
certificate of incorporation was authorized was by the
affirmative vote of at least a majority of the Board of Directors
of the corporation at a meeting duly convened and held on July
21, 1998, at which a quorum was present throughout.
IN WITNESS WHEREOF, we, the undersigned, have subscribed
this Certificate on the 18th day of August, 1998 and affirm the
statement, contained herein as true under penalties of perjury.
/S/James T. Byrne, Jr.
Senior Vice President
James T. Byrne, Jr.
/S/ Lea Lahtinen
Assistant Secretary
Lea Lahtinen
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
BANKERS TRUST CORPORATION
_____________________
Under Section 805 of the Business Corporation Law
_____________________
STATE OF NEW YORK
DEPARTMENT OF STATE
Filed August 25, 1998
_____________________
Bankers Trust Corporation
130 Liberty Street
New York, New York 10006
