UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-5920
BANKERS TRUST 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___
The registrant is a wholly-owned subsidiary of Deutsche Bank AG. As of the date
hereof, 1 share of the registrant's Common Stock par value $1 per share, was
issued and outstanding.
<PAGE>
1
BANKERS TRUST CORPORATION
JUNE 30, 2000 FORM 10-Q
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income
Three Months Ended June 30, 2000 and 1999 2
Six Months Ended June 30, 2000 and 1999 3
Consolidated Statement of Comprehensive Income
Three Months Ended June 30, 2000 and 1999
Six Months Ended June 30, 2000 and 1999 4
Consolidated Balance Sheet
At June 30, 2000 and December 31, 1999 5
Consolidated Statement of Changes in Stockholders' Equity
Six Months Ended June 30, 2000 and 1999 6
Consolidated Statement of Cash Flows
Six Months Ended June 30, 2000 and 1999 7
Consolidated Schedule of Net Interest Revenue
Three Months and Six Months Ended June 30, 2000 and 1999 8
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 six months
ended June 30, 2000 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 Bankers Trust Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 as supplemented by the first quarter 2000
Form 10-Q.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 34
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 35
SIGNATURE 36
<PAGE>
2
PART I. FINANCIAL INFORMATION
BANKERS TRUST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions)
(unaudited)
<TABLE>
<CAPTION>
Increase
THREE MONTHS ENDED JUNE 30, 2000 1999 (Decrease)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $889 $1,293 $(404)
Interest expense 749 1,057 (308)
--------------------------------------------------------------------------------------------------------------
Net interest revenue 140 236 (96)
Provision for credit losses-loans (2) (25) 23
--------------------------------------------------------------------------------------------------------------
Net interest revenue after provision for
credit losses-loans 142 261 (119)
--------------------------------------------------------------------------------------------------------------
NONINTEREST REVENUE
Trading 31 (407) 438
Fiduciary and funds management 208 284 (76)
Corporate finance fees 45 245 (200)
Other fees and commissions 82 153 (71)
Securities available for sale gains (losses) 31 (139) 170
Insurance premiums -- 38 (38)
Other (40) (166) 126
--------------------------------------------------------------------------------------------------------------
Total noninterest revenue 357 8 349
--------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSES
Salaries and commissions 121 337 (216)
Incentive compensation and employee benefits 100 283 (183)
Change in control related incentive
compensation and employee benefits -- 1,101 (1,101)
Agency and other professional service fees 55 159 (104)
Communication and data services 20 66 (46)
Occupancy, net 26 62 (36)
Furniture and equipment 30 69 (39)
Travel and entertainment 11 54 (43)
Provision for policyholder benefits -- 51 (51)
Other 163 161 2
Restructuring charge (46) 459 (505)
---------------------------------------------------------------------------------------------------------------
Total noninterest expenses 480 2,802 (2,322)
---------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 19 (2,533) 2,552
Income taxes (benefit) 36 (585) 621
--------------------------------------------------------------------------------------------------------------
NET LOSS $ (17) $(1,948) $1,931
==============================================================================================================
</TABLE>
Certain prior period amounts have been reclassified to conform to the current
presentation.
<PAGE>
3
BANKERS TRUST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(in millions)
(unaudited)
<TABLE>
<CAPTION>
Increase
SIX MONTHS ENDED JUNE 30, 2000 1999 (Decrease)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET INTEREST REVENUE
Interest revenue $1,705 $2,804 $(1,099)
Interest expense 1,449 2,307 (858)
-------------------------------------------------------------------------------------------------------------
Net interest revenue 256 497 (241)
Provision for credit losses-loans (40) (25) (15)
-------------------------------------------------------------------------------------------------------------
Net interest revenue after provision for
credit losses-loans 296 522 (226)
-------------------------------------------------------------------------------------------------------------
NONINTEREST REVENUE
Trading 94 (67) 161
Fiduciary and funds management 413 555 (142)
Corporate finance fees 82 442 (360)
Other fees and commissions 162 364 (202)
Securities available for sale gains (losses) 31 (143) 174
Insurance premiums -- 86 (86)
Other 151 20 131
-------------------------------------------------------------------------------------------------------------
Total noninterest revenue 933 1,257 (324)
-------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSES
Salaries and commissions 244 710 (466)
Incentive compensation and employee benefits 218 715 (497)
Change in control related incentive
compensation and employee benefits -- 1,101 (1,101)
Agency and other professional service fees 97 250 (153)
Communication and data services 46 132 (86)
Occupancy, net 51 120 (69)
Furniture and equipment 61 138 (77)
Travel and entertainment 21 84 (63)
Provision for policyholder benefits -- 114 (114)
Other 410 280 130
Restructuring charge (46) 459 (505)
-------------------------------------------------------------------------------------------------------------
Total noninterest expenses 1,102 4,103 (3,001)
-------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 127 (2,324) 2,451
Income taxes (benefit) 119 (516) 635
-------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $8 $(1,808) $1,816
=============================================================================================================
</TABLE>
Certain prior period amounts have been reclassified to conform to the current
presentation.
<PAGE>
4
BANKERS TRUST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $(17) $(1,948) $ 8 $(1,808)
------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments:
Unrealized foreign currency translation
gains (losses) arising during period,
net of tax(a) (17) 27 (53) (3)
Reclassification adjustment for realized
foreign currency translation (gains)
losses, net of tax(b) -- 172 4 172
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period, net of tax(c) 67 (24) 83 (24)
Reclassification adjustment for realized
(gains) losses, net of tax(d) (18) 117 (18) 117
-----------------------------------------------------------------------------------------------------------------
Total other comprehensive income 32 292 16 262
-----------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS) $ 15 $(1,656) $24 $(1,546)
==================================================================================================================
</TABLE>
(a) Amounts are net of income tax expense (benefit) of $(11) million and $4
million for the three months ended June 30, 2000 and June 30, 1999,
respectively and $(30) million and $(19) million for the six months ended
June 30, 2000 and June 30, 1999, respectively.
(b) Amounts are net of income tax expense of $2 million for the six months
ended June 30, 2000 and $9 million for the three and six months ended June
30, 1999.
(c) Amounts are net of income tax expense (benefit) of $3 million and $(8)
million for the three months ended June 30, 2000 and June 30, 1999,
respectively and $13 million and $8 million for the six months ended June
30, 2000 and June 30, 1999, respectively.
(d) Amounts are net of income tax expense (benefit) of $13 million and $(22)
million for the three months ended June 30, 2000 and June 30, 1999,
respectively and $13 million and $(26) million for the six months ended
June 30, 2000 and June 30, 1999, respectively.
<PAGE>
5
BANKERS TRUST CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in millions, except par value)
<TABLE>
<CAPTION>
June 30, December 31,
2000* 1999
-----------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,309 $ 3,212
Interest-bearing deposits with banks 10,783 4,693
Federal funds sold 3 2,472
Securities purchased under resale agreements 4,347 6,764
Trading assets:
Government securities 2,243 2,296
Corporate debt securities 2,522 1,367
Equity securities 9,223 7,144
Swaps, options and other derivatives 3,194 4,807
Other trading assets 3,868 3,403
----------------------------------------------------------------------------------------------------
Total trading assets 21,050 19,017
Securities available for sale 597 3,252
Loans, net of allowance for credit losses of $419
at June 30, 2000 and $491 at December 31, 1999 21,310 19,471
Customer receivables 282 306
Accounts receivable and accrued interest 2,519 2,307
Other assets 7,628 6,663
----------------------------------------------------------------------------------------------------
Total $70,828 $68,157
====================================================================================================
LIABILITIES
Noninterest-bearing deposits
Domestic offices $ 2,637 $ 2,690
Foreign offices 1,456 2,299
Interest-bearing deposits
Domestic offices 9,058 12,118
Foreign offices 6,070 6,362
----------------------------------------------------------------------------------------------------
Total deposits 19,221 23,469
Trading liabilities:
Securities sold, not yet purchased
Government securities 54 53
Equity securities 19 21
Other trading liabilities 11 9
Swaps, options and other derivatives 3,668 5,183
----------------------------------------------------------------------------------------------------
Total trading liabilities 3,752 5,266
Securities loaned and securities sold under
repurchase agreements 54 56
Other short-term borrowings 14,326 11,540
Accounts payable and accrued expenses 3,484 3,314
Other liabilities, including allowance for credit losses
of $4 at June 30, 2000 and $24 at December 31, 1999 3,757 3,728
Long-term debt not included in risk-based capital 18,321 12,582
Long-term debt included in risk-based capital 2,157 2,424
Mandatorily redeemable capital securities of subsidiary
trusts holding solely junior subordinated deferrable
interest debentures included in risk-based capital 1,404 1,428
----------------------------------------------------------------------------------------------------
Total liabilities 66,476 63,807
----------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock 364 376
Common stock, $1 par value
Authorized, 200 shares; Issued, 1 share -- --
Capital surplus 2,319 2,318
Retained earnings 1,683 1,686
Accumulated other comprehensive income:
Net unrealized gains on securities available
for sale, net of taxes 81 16
Foreign currency translation, net of taxes (95) (46)
----------------------------------------------------------------------------------------------------
Total stockholders' equity 4,352 4,350
----------------------------------------------------------------------------------------------------
Total $70,828 $68,157
====================================================================================================
</TABLE>
* Unaudited
Certain prior period amounts have been reclassified to conform to the
current presentation.
<PAGE>
6
BANKERS TRUST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in millions, except par value)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000 1999
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCK
Balance, January 1 $ 376 $ 394
Preferred stock repurchased (12) --
-----------------------------------------------------------------------------------------------------
Balance, June 30 364 394
-----------------------------------------------------------------------------------------------------
COMMON STOCK
Balance, January 1 --* 105
Retirement of common stock -- (105)
Issuance of common stock -- --*
-----------------------------------------------------------------------------------------------------
Balance, June 30 --* --*
-----------------------------------------------------------------------------------------------------
CAPITAL SURPLUS
Balance, January 1 2,318 1,613
Preferred stock repurchased 1 --
Common stock distributed under employee benefit plans -- 4
Capital transactions related to change in control -- (700)
Capital contribution from parent -- 1,400
-----------------------------------------------------------------------------------------------------
Balance, June 30 2,319 2,317
-----------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance, January 1 1,686 3,504
Net income (loss) 8 (1,808)
Cash dividends declared
Preferred stock (11) (10)
Common stock -- (98)
Treasury stock distributed under employee benefit plans -- (95)
-----------------------------------------------------------------------------------------------------
Balance, June 30 1,683 1,493
-----------------------------------------------------------------------------------------------------
COMMON STOCK IN TREASURY, AT COST
Balance, January 1 -- (1,056)
Purchases of stock -- (71)
Treasury stock distributed under employee benefit plans -- 322
Capital transactions related to change in control -- 805
-----------------------------------------------------------------------------------------------------
Balance, June 30 -- --
-----------------------------------------------------------------------------------------------------
OTHER STOCKHOLDERS' EQUITY
Balance, January 1 -- 599
Deferred stock awards granted, net -- 1
Deferred stock distributed -- (216)
Amortization of deferred compensation, net -- 749
Capital transactions related to change in control -- (1,158)
Other -- 25
-----------------------------------------------------------------------------------------------------
Balance, June 30 -- --
-----------------------------------------------------------------------------------------------------
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, January 1 (46) (398)
Translation adjustments/entity transfers and sales (81) 141
Income taxes 32 28
-----------------------------------------------------------------------------------------------------
Balance, June 30 (95) (229)
-----------------------------------------------------------------------------------------------------
SECURITIES VALUATION ALLOWANCE
Balance, January 1 16 (65)
Change in unrealized net gains, after applicable
income taxes and minority interest 65 93
-----------------------------------------------------------------------------------------------------
Balance, June 30 81 28
-----------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY, JUNE 30 $4,352 $4,003
=====================================================================================================
</TABLE>
* 1 share, $1 par value.
<PAGE>
7
BANKERS TRUST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000 1999
-------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 8 $(1,808)
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Provision for credit losses - loans (40) (25)
Provision for credit losses-other (20) (4)
Provision for policyholder benefits -- 114
Restructuring charge (release) (46) 459
Deferred income taxes, net 51 (228)
Depreciation and other amortization and accretion 18 869
Other, net 6 121
-------------------------------------------------------------------------------------------------
Earnings adjusted for noncash charges and credits (23) (502)
Net change in:
Trading assets (2,437) (16,407)
Trading liabilities (1,502) 26,708
Receivables and payables from securities transactions 87 1,080
Customer receivables 24 (808)
Other operating assets and liabilities, net (606) (209)
Securities available for sale (gains) losses (31) 143
-------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (4,488) 10,005
-------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits with banks (6,122) (6,197)
Federal funds sold 2,469 1,776
Securities purchased under resale agreements 2,417 (13,898)
Securities borrowed -- (8,763)
Loans (1,874) (1,617)
Securities available for sale:
Purchases (260) (4,052)
Maturities and other redemptions 2,238 991
Sales 500 7,986
Acquisitions of premises and equipment (69) (68)
Other, net 10 (465)
Proceeds from transfer of legal entities 71 1,828
-------------------------------------------------------------------------------------------------
Net cash used in investing activities (620) (22,479)
-------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in:
Deposits (4,208) 1,231
Securities loaned and securities sold under
repurchase agreements (2) 13,588
Other short-term borrowings 2,344 (3,138)
Issuances of long-term debt 7,383 1,841
Repayments of long-term debt (1,245) (2,883)
Redemptions and repurchases of preferred stock (11) --
Purchases of treasury stock -- (71)
Cash dividends paid (11) (204)
Capital contribution from parent -- 1,400
Other, net (30) 25
-------------------------------------------------------------------------------------------------
Net cash provided by financing activities 4,220 11,789
-------------------------------------------------------------------------------------------------
Net effect of exchange rate changes on cash (15) --
-------------------------------------------------------------------------------------------------
Net decrease in cash and due from banks (903) (685)
Cash and due from banks, beginning of period 3,212 2,837
-------------------------------------------------------------------------------------------------
Cash and due from banks, end of period $2,309 $ 2,152
=================================================================================================
Interest paid $2,128 $ 2,761
=================================================================================================
Income taxes paid, net $ 4 $31
=================================================================================================
Noncash investing activities:
Transfer of legal entity in exchange for shares
in affiliate $ -- $ 792
Other 27 24
-------------------------------------------------------------------------------------------------
Total noncash investing activities $ 27 $ 816
=================================================================================================
</TABLE>
Certain prior period amounts have been reclassified to conform to the current
presentation.
<PAGE>
8
BANKERS TRUST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF NET INTEREST REVENUE
(in millions)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ------------------
2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST REVENUE
Interest-bearing deposits with banks $183 $ 72 $ 238 $ 132
Federal funds sold 19 51 52 77
Securities purchased under resale agreements 41 223 84 517
Securities borrowed -- 146 -- 369
Trading assets 253 283 445 612
Securities available for sale
Taxable 11 112 44 254
Exempt from federal income taxes 2 6 4 18
Loans 374 373 823 767
Customer receivables 6 27 15 58
------------------------------------------------------------------------------------------------------------
Total interest revenue 889 1,293 1,705 2,804
------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Interest-bearing deposits
Domestic offices 138 195 285 388
Foreign offices 129 198 266 427
Trading liabilities -- 54 -- 122
Securities loaned and securities sold under
repurchase agreements 1 183 2 526
Other short-term borrowings 210 257 394 485
Long-term debt 243 141 445 302
Trust preferred capital securities 28 29 57 57
------------------------------------------------------------------------------------------------------------
Total interest expense 749 1,057 1,449 2,307
------------------------------------------------------------------------------------------------------------
NET INTEREST REVENUE $140 $ 236 $ 256 $ 497
============================================================================================================
</TABLE>
<PAGE>
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BUSINESS CHANGES
On June 4 1999, Deutsche Bank AG ("Deutsche Bank"), through its U.S. holding
corporation, Taunus Corporation, acquired all of the outstanding shares of
common stock of Bankers Trust Corporation ("Bankers Trust") from its
shareholders (the "Acquisition"). Prior to the Acquisition, Bankers Trust
Corporation together with its subsidiaries (the "Corporation" or the "Firm") was
a global financial institution, providing products and services to its clients
worldwide. Subsequent to the Acquisition and associated reorganization
activities, the Corporation and its subsidiaries conduct their business
primarily in the Americas, focusing their activities principally in the asset
management, lending, institutional services, private equity, and private banking
businesses.
On June 5, 1999, Bankers Trust transferred its wholly-owned subsidiary BT Alex.
Brown Incorporated ("BTAB") and substantially all of its interest in Bankers
Trust International PLC ("BTI") to Deutsche Bank Securities Inc. ("DBSI") and
Deutsche Holdings (BTI) Ltd., respectively, which are wholly-owned subsidiaries
of Deutsche Bank. On August 31, 1999, Bankers Trust Corporation completed the
sale of Bankers Trust Australia Limited ("BTAL"), a wholly-owned subsidiary, to
the Principal Financial Group.
In connection with the Acquisition, and in addition to the foregoing
transactions, the Corporation has and will continue to transfer certain
entities/businesses and financial assets and liabilities to Deutsche Bank
related entities. The consideration received and to be received for such
transactions was and will be fair market value of the financial assets and
liabilities at and on the date of transfer.
For further discussion of these transactions, see pages 3 and 29 of Bankers
Trust's 1999 Annual Report on Form 10-K.
The Corporation anticipates further curtailment of certain of its activities as
a result of its ongoing reorganization and integration into Deutsche Bank.
RESULTS OF OPERATIONS
The Corporation reported a loss of $17 million for the three months ended June
30, 2000 and income of $8 million for the first six months of 2000.
The Corporation reported a loss of $1,948 million for the three months ended
June 30, 1999 and a loss of $1,808 million for the first six months of 1999. In
conjunction with the Acquisition, in the second quarter of 1999 the Corporation
incurred pre-tax charges of approximately $1.1 billion in change of
control-related costs and a pre-tax restructuring charge of $459 million. Also,
in connection with the Acquisition, the Corporation incurred other charges
reflecting a change in management's intention regarding certain assets as a
result of integrating the Corporation into Deutsche Bank, a change in certain
pricing methodologies in order to conform to those of Deutsche Bank, and the
transfer of certain available for sale securities to Deutsche Bank related
entities based on changes in management responsibility.
Because of the significant business changes as discussed above, the
Corporation's historical financial statements are not fully comparable for all
periods presented.
<PAGE>
10
BUSINESS SEGMENT RESULTS
Business segment results, which are presented in accordance with U.S. generally
accepted accounting principles, are derived from internal management reports.
In conjunction with the Acquisition, the Corporation realigned its business
activities to conform to Deutsche Bank's management structure. In this regard,
Retail and Private Banking focuses on the Corporation's private banking
activities. The Asset Management division combines the Corporation's
institutional asset management and retail investment fund businesses. Global
Corporates and Institutions includes the Corporation's commercial banking and
investment banking activities as well as trading activities. This business
segment also includes credit business, trade finance, structured finance and
cash management in addition to the Corporation's private equity business. Global
Technology and Services includes four product groups: payments, securities
processing, custody services and electronic banking services.
Prior period results have been restated for changes in management structure.
The following tables present results by Business Segment:
<TABLE>
<CAPTION> Total Non- Pretax
Three Months Ended June 30, 2000 Total Net interest Income/
(in millions) Revenue* Expenses (Loss)
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail and Private Banking $ 38 $ 38 $--
Asset Management 72 66 6
Global Corporates and Institutions 188 189 (1)
Global Technology and Services 235 254 (19)
----------------------------------------------------------------------------------
Total Business Segments 533 547 (14)
----------------------------------------------------------------------------------
Corporate Items (34) (67) 33
----------------------------------------------------------------------------------
Total $499 $480 $19
==================================================================================
</TABLE>
* There were no material intersegment revenues among the business segments.
<TABLE>
<CAPTION>
Total Non- Pretax
Three Months Ended June 30, 1999 Total Net interest Income/
(in millions) Revenue* Expenses (Loss)
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail and Private Banking $ 46 $ 65 $ (19)
Asset Management 38 37 1
Global Corporates and Institutions (354) 1,426 (1,780)
Global Technology and Services 258 336 (78)
------------------------------------------------------------------------------------
Total Business Segments (12) 1,864 (1,876)
------------------------------------------------------------------------------------
Corporate Items** 281 938 (657)
------------------------------------------------------------------------------------
Total $269 $2,802 $(2,533)
====================================================================================
</TABLE>
* There were no material intersegment revenues among the business segments.
** Due to the sale of BTAL in the third quarter of 1999, its results are
included in Corporate Items. Corporate Items also includes restructuring
charges of $459 million.
<PAGE>
11
BUSINESS SEGMENT RESULTS (continued)
<TABLE>
<CAPTION> Total Non- Pretax
Six Months Ended June 30, 2000 Total Net interest Income/
(in millions) Revenue* Expenses (Loss)
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail and Private Banking $ 74 $ 77 $ (3)
Asset Management 153 128 25
Global Corporates and Institutions 574 453 121
Global Technology and Services 468 528 (60)
------------------------------------------------------------------------------------
Total Business Segments 1,269 1,186 83
------------------------------------------------------------------------------------
Corporate Items (40) (84) 44
------------------------------------------------------------------------------------
Total $1,229 $1,102 $127
====================================================================================
</TABLE>
* There were no material intersegment revenues among the business segments.
<TABLE>
<CAPTION> Total Non- Pretax
Six Months Ended June 30, 1999 Total Net interest Income/
(in millions) Revenue* Expenses (Loss)
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Retail and Private Banking $ 93 $ 110 $ (17)
Asset Management 96 72 24
Global Corporates and Institutions 487 2,216 (1,729)
Global Technology and Services 489 539 (50)
---------------------------------------------------------------------------------------
Total Business Segments 1,165 2,937 (1,772)
---------------------------------------------------------------------------------------
Corporate Items** 614 1,166 (552)
---------------------------------------------------------------------------------------
Total $1,779 $4,103 $(2,324)
=======================================================================================
</TABLE>
* There were no material intersegment revenues among the business segments.
** Due to the sale of BTAL in the third quarter of 1999, its results are
included in Corporate Items. Includes restructuring charges of $459
million.
<PAGE>
12
BUSINESS SEGMENT RESULTS (continued)
The Retail and Private Banking business recorded flat pre-tax results in the
second quarter of 2000, compared to a pre-tax loss of $19 million in the prior
year quarter. For the first six months of 2000, this business recorded a pre-tax
loss of $3 million as compared to a pre-tax loss of $17 million in the prior
year period. The current quarter and year-to-date results reflect lower revenue
from fiduciary and funds management activities resulting from certain foreign
activities transferred to a Deutsche Bank related entity in July 1999. The prior
year quarter and prior year-to-date results contain pre-tax COC related costs of
approximately $21 million.
Asset Management recorded pre-tax income of $6 million in the second quarter of
2000, compared to pre-tax income of $1 million in the 1999 second quarter. The
increase in pre-tax income from the prior year period was mainly attributable to
higher fiduciary and funds management revenue. Pre-tax income was $25 million
for the first six months of 2000 versus $24 million for the first six months of
1999. The prior year quarter and prior year-to-date results contain pre-tax COC
related costs of approximately $18 million.
The Global Corporates and Institutions business recorded a pre-tax loss of $1
million in the second quarter of 2000, compared to a pre-tax loss of $1,780
million in the 1999 second quarter. For the first six months of 2000, pre-tax
income was $121 million versus a pre-tax loss of $1,729 million for the first
six months of 1999. The prior year quarter and prior year-to-date results
contain pre-tax COC related costs of approximately $848 million. Trading losses
for the second quarter of 1999 negatively impacted both the quarter and
year-to-date results. Total prior period net revenue also includes the impact of
a change in management's intention regarding certain assets as a result of
integrating the Corporation into Deutsche Bank, as well as the transfer of
certain securities available for sale to Deutsche Bank related entities.
The Corporation's Global Technology and Services business recorded a pre-tax
loss of $19 million for the current quarter compared to a pre-tax loss of $78
million in the prior year quarter. Pre-tax loss was $60 million for the first
six months of 2000 and $50 million for the first six months of 1999. The current
year-to-date results included severance expenses related to certain senior
management changes in the Global Institutional Services business. The prior year
periods reflected pre-tax COC related costs of approximately $86 million.
Corporate Items generally include revenue and expenses that have not been
allocated to business segments and the results of smaller businesses that are
not included in the main business segments. Due to the sale of BTAL and
Consorcio in the third quarter of 1999 and second quarter of 1999, respectively,
their results are included within Corporate Items for the three months and six
months ended June 30, 1999. The current year includes a $46 million release of
restructuring reserves as more fully discussed on page 18. The prior year
periods include restructuring charges of approximately $459 million.
<PAGE>
13
BUSINESS SEGMENT RESULTS (continued)
<TABLE>
<CAPTION>
The following table reconciles total pre-tax income (loss) for business segments
to consolidated pre-tax income (loss) (in millions):
SIX MONTHS ENDED JUNE 30, 2000 1999
---------------------------------------------------------------------------------------
<S> <C> <C>
Total pre-tax income (loss) reported for business segments $ 83 $(1,772)
Restructuring releases (charges) 46 (459)
Realized foreign currency translation losses -- (168)
Earnings associated with unassigned capital 140 123
Credit quality adjustment -- 94
Other unallocated amounts (142) (142)
---------------------------------------------------------------------------------------
Consolidated pre-tax income(loss) $ 127 $(2,324)
=======================================================================================
</TABLE>
REVENUE
Net Interest Revenue
The table below presents 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 Six Months Ended
June 30, June 30,
-------------------- --------------------
2000 1999 2000 1999
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INTEREST REVENUE (in millions)
Book basis $ 140 $ 236 $ 256 $ 497
Tax equivalent adjustment 1 4 2 13
----------------------------------------------------------------------------------------------------
Fully taxable basis $ 141 $ 240 $ 258 $510
====================================================================================================
AVERAGE BALANCES (in millions)
Interest-earning assets $47,777 $84,745 $47,448 $92,410
Interest-bearing liabilities 44,796 82,120 44,355 89,527
----------------------------------------------------------------------------------------------------
Earning assets financed by
noninterest-bearing funds $ 2,981 $ 2,625 $ 3,093 $2,883
====================================================================================================
AVERAGE RATES (fully taxable basis)
Yield on interest-earning assets 7.49 6.14% 7.23 6.15%
Cost of interest-bearing liabilities 6.72 5.16 6.57 5.20
----------------------------------------------------------------------------------------------------
Interest rate spread 0.77 0.98 0.66 0.95
Contribution of noninterest-bearing
funds 0.42 0.16 0.43 0.16
----------------------------------------------------------------------------------------------------
Net interest margin 1.19% 1.14% 1.09% 1.11%
====================================================================================================
</TABLE>
Net interest revenue for the second quarter of 2000 totaled $140 million, down
$96 million, or 41 percent, from the second quarter of 1999. The $96 million
decrease in net interest revenue was primarily due to a $77 million decrease in
trading-related net interest revenue, which was $15 for the second quarter of
2000. Nontrading-related net interest revenue totaled $125 million for the
second quarter of 2000 versus $144 million for the comparable period in 1999.
<PAGE>
14
REVENUE (continued)
Net interest revenue for the first half of 2000 totaled $256 million, down $241
million, or 48 percent, from the first half of 1999. The $241 million decrease
in net interest revenue was primarily due to a $170 million decrease in
trading-related net interest revenue which was $15 million for the first half of
2000. Non trading-related net interest revenue totaled $241 million for the
first half of 2000 versus $312 million for the comparable period in 1999.
In the second quarter of 2000, the interest rate spread was 0.77 percent
compared to 0.98 percent in the prior year period. Net interest margin increased
to 1.19 percent from 1.14 percent. The yield on interest-earning assets
increased by 135 basis points and the cost of interest-bearing liabilities
increased by 156 basis points. Average interest-earning assets totaled $47.8
billion for the second quarter of 2000, down $37.0 billion from the same period
in 1999. The decrease was primarily attributable to declines in trading assets
and securities borrowed and other money-market related activities. Average
interest-bearing liabilities totaled $44.8 billion for the second quarter of
2000, down $37.3 billion from the same period in 1999. The decrease was
primarily attributable to a decline in securities sold under repurchase
agreements, interest-bearing deposits and other money-market related activities.
In the first six months of 2000, the interest rate spread was 0.66 percent
compared to 0.95 percent in the prior period. Net interest margin declined from
1.11 percent to 1.09 percent. The yield on interest-earning assets increased by
108 basis points and the cost of interest bearing liabilities increased by 137
basis points.
Trading Revenue
Combined trading revenue and trading-related net interest revenue for the second
quarter of 2000 totaled $46 million, up $361 million from the second quarter of
1999. Combined trading revenue and trading-related net interest revenue for the
first six months of 2000 totaled $109 million, down $9 million from the first
six months of 1999. Trading losses for the prior year quarter and first six
months of 1999 reflect the impact of a change in management's intention
regarding certain assets as a result of integrating the Corporation into
Deutsche Bank and other risk reduction efforts.
The Corporation's trading activities were significantly reduced in the second
half of 1999, reflecting the effect of integrating the Corporation into Deutsche
Bank. The Corporation anticipates further curtailment of trading-related
activities as a result of its ongoing reorganization and integration into
Deutsche Bank.
<PAGE>
15
REVENUE (continued)
The table below presents the Corporation's trading 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>
(in millions) Three months ended June 30, 2000 1999
--------------------------------------------------------------------------------------
<S> <C> <C>
Interest rate risk $ 22 $(378)
Foreign exchange risk (9) 48
Equity and commodity risk 18 (77)
--------------------------------------------------------------------------------------
Total trading revenue 31 (407)
Trading-related net interest revenue 15 92
--------------------------------------------------------------------------------------
Combined total $ 46 $(315)
======================================================================================
<CAPTION>
(in millions) Six months ended June 30, 2000 1999
--------------------------------------------------------------------------------------
<S> <C> <C>
Interest rate risk $ 38 $(243)
Foreign exchange risk 2 154
Equity and commodity risk 54 22
-------------------------------------------------------------------------------------
Total trading revenue 94 (67)
Trading-related net interest revenue 15 185
--------------------------------------------------------------------------------------
Combined total $109 $ 118
======================================================================================
</TABLE>
Second Quarter 2000 vs. Second Quarter 1999
Interest Rate Risk - Trading revenue related to interest rate risk increased
from the prior year quarter. The prior year quarter reflected the integration of
Bankers Trust trading assets into Deutsche Bank. The prior period also included
post merger risk reduction initiatives and the impact of a change in
management's intention regarding certain trading and trading related assets.
Foreign Exchange Risk - The decrease is primarily attributable to the sale of
BTAL in the third quarter of 1999 as well as the overall reduction of the
trading portfolio.
Equity and Commodity Risk - The increase is due to losses incurred in the prior
year quarter related to the Corporation's overall reduction of trading related
activities.
Six Months 2000 vs. Six Months 1999
Interest Rate Risk - Trading revenue related to interest rate risk increased
from the prior period. The prior year period reflected the integration of
Bankers Trust trading assets into Deutsche Bank. The prior period also included
post merger risk reduction initiatives and the impact of a change in
management's intention regarding certain trading and trading related assets.
Foreign Exchange Risk - The decrease is primarily attributed to the overall
reduction of the trading portfolio in addition to the sale of BTAL in the third
quarter of 1999, which in the prior year was responsible for a significant
portion of foreign exchange trading revenue.
Equity and Commodity Risk - Trading revenue related to equity and commodity risk
increased from the prior year. The increase is reflective of prior year risk
reduction initiatives consistent with the Corporation's overall curtailment of
trading related activities.
<PAGE>
16
REVENUE (continued)
Noninterest Revenue (Excluding Trading)
Second Quarter 2000 vs. Second Quarter 1999
Fiduciary and funds management revenue was down $76 million, or 27 percent, from
the second quarter of 1999. The decrease is due primarily to the sale of BTAL in
the third quarter of 1999.
Corporate finance fees of $45 million decreased $200 million from the $245
million earned in the second quarter of 1999. The decline is primarily
attributable to lower revenue from underwriting, merger and acquisition and
financial advisory activities resulting from the transfer of BTAB to DBSI in
June 1999.
Other fees and commissions of $82 million decreased $71 million from the prior
year quarter primarily due to lower fees for brokerage services resulting from
the transfer of BTAB to DBSI in June 1999.
Insurance premium revenue decreased $38 million from the prior year quarter. The
Corporation exited the insurance business with the sale of its remaining stake
in Consorcio in the second quarter of 1999.
Securities available for sale gains totaled $31 million in the current quarter
compared to securities available for sale losses of $139 million in the prior
year quarter. The prior period reflected third-party sale activity and the
transfer of Latin American debt securities to related Deutsche Bank entities
based on changes in management responsibility related to such securities.
Other noninterest revenue totaled $(40) million compared to $(166) million in
the prior year period. The prior year period included the recognition of
cumulative translation adjustments for certain legal entities transferred to
affiliated Deutsche Bank entities.
Six Months 2000 vs. Six Months 1999
Fiduciary and funds management revenue was down $142 million, or 26 percent,
from the first half of 1999. The decrease is due primarily to the sale of BTAL
in the third quarter of 1999.
Corporate Finance fees of $82 million decreased $360 million from the $442
million earned in the first half of 1999. The decline is primarily attributable
to lower revenue from underwriting, merger and acquisition and financial
advisory activities resulting from the transfer of BTAB to DBSI in June 1999.
Other fees and commissions of $162 million decreased $202 million from the prior
year period primarily due to lower fees for brokerage services resulting from
the transfer of BTAB to DBSI in June 1999.
Insurance premium revenue decreased $86 million from the prior year period. The
Corporation exited the insurance business with the sale of its remaining stake
in Consorcio in the second quarter of 1999.
Securities available for sale gains totaled $31 million for the first half of
2000 compared to securities available for sale losses of $143 million in the
prior year period. The prior period reflected third-party sale activity and the
transfer of Latin American debt securities to related Deutsche Bank entities
based on changes in management responsibility related to such securities.
Other noninterest revenue totaled $151 million compared to $20 million in the
prior year period. The current year-to-date period reflected higher revenue from
mark-to-market adjustments on venture capital equity securities.
<PAGE>
17
PROVISION AND ALLOWANCES FOR CREDIT LOSSES
The allowance for credit losses represents management's estimate of probable
losses that have occurred as of the date of the financial statements. The
allowance for credit losses-loans is reported as a reduction of loans and the
allowance for credit losses for other credit-related items is reported in other
liabilities.
The allowance for credit losses-loans is comprised of a specific allowance
component, a country risk component and an expected loss component. The specific
allowance component is the amount required for impaired loans as calculated
under SFAS 114, "Accounting by Creditors for Impairment of a Loan". The country
risk component is the amount provided for exposures in countries experiencing
financial stress, excluding those exposures already identified and evaluated as
impaired loans. The expected loss component is an estimate of the remaining
probable losses inherent in the loan portfolio. This component is determined by
using a statistical model that utilizes a loan-type, risk-rated stratified
approach. Loss factors are derived by analyzing historical charge-offs and
recent economic events and applied to categories of loans by type and risk
rating.
The provisions for credit losses and the other changes in the allowances for
credit losses are shown below (in millions).
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
Total allowance for credit losses 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loans
Balance, beginning of period $422 $603 $491 $652
Provision for credit losses (2) (25) (40) (25)
Transfer to Deutsche Bank - (29)* - (29)*
Net charge-offs
Charge-offs 3 24 43 84
Recoveries 2 7 11 18
-------------------------------------------------------------------------------------------------------
Total net charge-offs 1 17 32 66
-------------------------------------------------------------------------------------------------------
Balance, end of period $419** $532 $419** $532
=======================================================================================================
Other liabilities
Balance, beginning of period $ 18 $ 18 $ 24 $ 18
Provision for credit losses (14) (4) (20) (4)
-------------------------------------------------------------------------------------------------------
Balance, end of period $ 4 $ 14 $4 $ 14
=======================================================================================================
</TABLE>
* Reflects the allowance for credit losses of BTI on the date of transfer.
** Comprised of a specific allowance component of $299 million, a country risk
component of $10 million and an expected loss component of $110 million at
June 30, 2000. Not comparable to the prior year periods due to revised
policies and procedures for determining the allowance for credit losses
implemented in the third quarter of 1999. The allowance for credit
losses-loans at December 31, 1999 was $491 million and was comprised of a
specific allowance component of $268 million, a country risk component of
$56 million and an expected loss component of $167 million.
<PAGE>
18
RESTRUCTURING AND OTHER RELATED ACTIVITIES
During the second and fourth quarters of 1999, the Corporation recorded pre-tax
charges for restructuring and other related activities totaling $459 million
("Plan 1") and $174 million ("Plan 2"), respectively. For a further discussion
of these charges, refer to page 43 of the Corporation's Annual Report on Form
10-K.
As of June 30, 2000, all significant restructuring initiatives contemplated in
Plan 1 have been completed. The remaining reserve balance of $21 million was
reversed in the second quarter of 2000 and is reflected in the Consolidated
Statement of Income for the three months and six months ended June 30, 2000.
In addition, management believes the cost to complete Plan 2 will be reduced by
$25 million resulting from certain management changes in the Global
Institutional Services business and a higher than anticipated level of employee
attrition. Such amount has been reversed in the second quarter of 2000 and is
reflected in the Consolidated Statement of Income for the three months and six
months ended June 30, 2000. At June 30, 2000, the remaining Plan 2 reserve
balance was $68 million. Plan 2 severance and other restructuring-related
activities are expected to be substantially completed during the remainder of
2000.
<PAGE>
19
EXPENSES
Second Quarter 2000 vs. Second Quarter 1999
As compared to the second quarter of 1999, salaries and commissions expense
decreased $216 million, or 64 percent, primarily due to a decrease in the
average number of employees resulting from the transfer of BTAB and BTI in the
second quarter of 1999, the sale of BTAL in the third quarter of 1999 and staff
reductions resulting from the Acquisition.
Incentive compensation and employee benefits decreased $183 million, or 65
percent from the prior year quarter, resulting from the previously mentioned
decrease in the average number of employees. In addition, the prior year quarter
included amortization expense for deferred compensation plans.
The prior year quarter included $1.1 billion of change in control (COC) related
incentive compensation and employee benefits, primarily as a result of
accelerated amortization of deferred compensation amounts as of the COC date.
The provision for policyholder benefits decreased $51 million from the prior
year quarter. The Corporation exited the insurance business with the sale of its
remaining stake in Consorcio in the second quarter of 1999.
Six Months 2000 vs. Six Months 1999
As compared to the first half of 1999, salaries and commissions expense
decreased $466 million, or 66 percent, primarily due to a decrease in the
average number of employees resulting from the transfer of BTAB and BTI in the
second quarter of 1999, the sale of BTAL in the third quarter of 1999 and staff
reductions resulting from the Acquisition.
Incentive compensation and employee benefits decreased $497 million, or 70
percent from the prior year-to-date period, resulting from the previously
mentioned decrease in the average number of employees. In addition, the prior
year-to-date period included amortization expense for deferred compensation
plans.
The prior year-to-date period included $1.1 billion of change in control related
incentive compensation and employee benefits, primarily as a result of
accelerated amortization of deferred compensation amounts as of the COC date.
The provision for policyholder benefits decreased $114 million from the prior
year period. The Corporation exited the insurance business with the sale of its
remaining stake in Consorcio in the second quarter of 1999.
Other noninterest expenses increased $130 million from the prior year period
primarily due to charges payable to a Deutsche Bank affiliated company relating
to compensation arrangements.
INCOME TAXES
Income tax expense for the second quarter of 2000 amounted to $36 million,
compared to a tax benefit of $585 million in the second quarter of 1999. For the
first six months of 2000, the income tax expense was $119 million, compared with
an income tax benefit of $516 million in the first half of 1999. The effective
tax rate was 189 percent for the current quarter and 94 percent for the six
months ended June 30, 2000, and 23 percent for the prior year quarter and 22
percent for six months ended June 30, 1999. The primary reason for the effective
tax rate in 2000 is state and local taxes and an increase in the deferred tax
valuation allowance.
<PAGE>
20
BALANCE SHEET ANALYSIS
The following table highlights the changes in the balance sheet. Since
quarter-end balances can be distorted by one-day fluctuations, an analysis of
changes in the quarterly averages is provided to give a better indication of
balance sheet trends.
<TABLE>
<CAPTION>
CONDENSED AVERAGE BALANCE SHEETS
---------------------------------
(in millions)
2nd Qtr 1st Qtr 4th Qtr
2000 2000 1999
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earning
Interest-bearing deposits with banks $ 6,915 $ 5,147 $ 3,867
Federal funds sold 1,222 2,263 3,608
Securities purchased under resale
agreements 2,160 2,940 5,478
Trading assets 15,714 13,885 6,221
Securities available for sale
Taxable 699 2,528 3,412
Exempt from federal income taxes 16 16 16
-------------------------------------------------------------------------------------------
Total securities available for sale 715 2,544 3,428
Loans
Domestic offices 17,867 17,143 16,132
Foreign offices 2,858 3,642 4,613
-------------------------------------------------------------------------------------------
Total loans 20,725 20,785 20,745
Customer receivables 326 633 569
-------------------------------------------------------------------------------------------
Total interest-earning assets 47,777 48,197 43,916
Noninterest-earning
Cash and due from banks 1,606 2,354 1,745
Noninterest-earning trading assets 5,748 3,915 8,541
All other assets 9,857 9,279 8,774
Less: Allowance for credit losses-loans (421) (424) (508)
-------------------------------------------------------------------------------------------
Total $64,567 $63,321 $62,468
===========================================================================================
LIABILITIES
Interest-bearing
Interest-bearing deposits
Domestic offices $ 9,670 $10,879 $12,200
Foreign offices 6,178 6,955 7,659
-------------------------------------------------------------------------------------------
Total interest-bearing deposits 15,848 17,834 19,859
Trading liabilities 53 53 39
Securities loaned and securities sold
under repurchase agreements 66 61 210
Other short-term borrowings 10,996 9,340 7,691
Long-term debt 16,416 15,197 13,915
Trust preferred capital securities 1,417 1,429 1,427
-------------------------------------------------------------------------------------------
Total interest-bearing liabilities 44,796 43,914 43,141
Noninterest-bearing
Noninterest-bearing deposits 3,539 4,503 4,724
Noninterest-bearing trading liabilities 5,126 4,153 4,516
All other liabilities 6,784 6,421 5,542
-------------------------------------------------------------------------------------------
Total liabilities 60,245 58,991 57,923
-------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock 364 368 392
Common stockholder's equity 3,958 3,962 4,153
-------------------------------------------------------------------------------------------
Total stockholders' equity 4,322 4,330 4,545
-------------------------------------------------------------------------------------------
Total $64,567 $63,321 $62,468
===========================================================================================
</TABLE>
<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 are as follows:
<TABLE>
<CAPTION> June 30, March 31, December 31,
(in millions) 2000 2000 1999
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fair value $597 $1,210 $3,252
Amortized cost 498 1,156 3,227
------------------------------------------------------------------------------------------------------
Excess of fair value over
amortized cost* $99 $ 54 $ 25
======================================================================================================
* Components:
Unrealized gains $107 $ 67 $ 45
Unrealized losses (8) (13) (20)
------------------------------------------------------------------------------------------------------
$ 99 $ 54 $ 25
======================================================================================================
</TABLE>
<PAGE>
22
TRADING DERIVATIVES
The Corporation manages trading positions in a variety of derivative contracts.
All 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 June 30, Average During
2000 2nd Qtr. 2000
------------------------ ---------------------
(Liabi- (Liabi-
(in millions) Assets lities) Assets lities)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTC Financial Instruments
Interest Rate and Currency
Swap Contracts $ 3,519 $(3,911) $ 3,461 $(3,906)
Interest Rate Contracts
Forwards -- -- -- --
Options purchased 138 113
Options written (144) (91)
Foreign Exchange Rate Contracts
Spot and Forwards -- (5) 105 --
Options purchased 17 16
Options written (17) (16)
Equity-related contracts 1,004 (1,009) 942 (1,014)
Commodity-related and other contracts 2,244 (2,244) 2,244 (2,244)
Exchange-Traded Options
Interest Rate -- -- -- --
Foreign exchange -- -- -- --
Commodity -- -- -- --
Equity -- (66) -- (31)
-----------------------------------------------------------------------------------------------------------
Total Gross Fair Values 6,922 (7,396) 6,881 (7,302)
Impact of Netting Agreements (3,728) 3,728 (3,982) 3,982
-----------------------------------------------------------------------------------------------------------
$3,194 (a) ($3,668) (a) $ 2,899 $(3,320)
======= ======= ======= =======
</TABLE>
(a) As reflected on the balance sheet in "Trading Assets" and "Trading
Liabilities."
<PAGE>
23
TRADING DERIVATIVES (continued)
<TABLE>
<CAPTION>
At December 31, Average During
1999 4th Qtr. 1999
----------------------------- ---------------------------
(Liabi- (Liabi-
(in millions) Assets lities) Assets lities)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OTC Financial Instruments
Interest Rate and Currency
Swap Contracts $ 6,400 $ (6,570) $ 6,927 $ (6,813)
Interest Rate Contracts
Forwards -- -- 3 (4)
Options purchased 519 414
Options written -- (614) -- (628)
Foreign Exchange Rate Contracts
Spot and Forwards 11 (3) 193 (134)
Options purchased 351 -- 388
Options written -- (350) -- (388)
Equity-related contracts 1,760 (1,865) 1,620 (1,893)
Commodity-related and other contracts 853 (852) 677 (707)
Exchange-Traded Options
Interest Rate -- -- -- --
Foreign exchange -- -- -- --
Commodity -- -- -- --
Equity -- (16) -- --
--------------------------------------------------------------------------------------------------------------------
Total Gross Fair Values 9,894 (10,270) 10,222 (10,567)
Impact of Netting Agreements (5,087) 5,087 (6,100) 6,100
--------------------------------------------------------------------------------------------------------------------
$ 4,807(a) $ (5,183)(a) $ 4,122 $ (4,467)
======== ======== ======== ========
</TABLE>
(a) As reflected on the balance sheet in "Trading Assets" and "Trading
Liabilities."
END-USER DERIVATIVES
The Corporation, as an end user, utilizes various types of derivative products
(principally interest rate and currency 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 securities available for sale, loans, 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 losses were $379 million at June 30,
2000 compared with unrealized losses of $145 million at December 31, 1999. The
$234 million increase was primarily due to the realization of $136 million in
gains related to the sell off of securities available for sale positions and
changes in 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
short-
Securities Interest- term Long-
(in millions) available Other bearing borrow- term
June 30, 2000 for sale Loans assets deposits ings debt(a) Total
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps(b)
Pay Variable
Unrealized Gain $ -- $ -- $ -- $ 4 $ 2 $ 9 $ 15
Unrealized (Loss) (1) (1) (270) (6) (177) (455)
---------------------------------------------------------------------------------------------------------------------
Pay Variable Net (1) (1) -- (266) (4) (168) (440)
---------------------------------------------------------------------------------------------------------------------
Pay Fixed
Unrealized Gain 2 -- -- 45 -- 3 50
Unrealized (Loss) -- -- -- (11) (1) -- (12)
----------------------------------------------------------------------------------------------------------------------
Pay Fixed Net 2 -- -- 34 (1) 3 38
----------------------------------------------------------------------------------------------------------------------
Total Unrealized
Gain 2 -- -- 49 2 12 65
---------------------------------------------------------------------------------------------------------------------
Total Unrealized
(Loss) (1) (1) -- (281) (7) (177) (467)
---------------------------------------------------------------------------------------------------------------------
Total Net $ 1 $ (1) $ -- $(232) $(5) $(165) $(402)
=====================================================================================================================
Currency Swaps and Forwards
Unrealized Gain $ -- $ -- $ -- $ -- $ -- $ 37 $ 37
Unrealized (Loss) -- -- -- -- -- (14) (14)
---------------------------------------------------------------------------------------------------------------------
Net $ -- $ -- $ -- $ -- $ -- $ 23 $ 23
=====================================================================================================================
Other Contracts
Unrealized Gain $ -- $ -- $ -- $ -- $ -- $ -- $ --
Unrealized (Loss) -- -- -- -- -- -- --
---------------------------------------------------------------------------------------------------------------------
Net $ -- $ -- $ -- $ -- $ -- $ -- $ --
=====================================================================================================================
Total Unrealized
Gain $ 2 $ -- $ -- $ 49 $ 2 $ 49 $ 102
Total Unrealized
(Loss) (1) (1) -- (281) (7) (191) (481)
---------------------------------------------------------------------------------------------------------------------
Total Net $ 1 $ (1) $ -- $(232) $(5) $(142) $(379)
=====================================================================================================================
</TABLE>
(a) Includes trust preferred capital securities.
(b) Includes swaps with embedded options to cancel.
<PAGE>
25
END-USER DERIVATIVES (continued)
<TABLE>
<CAPTION>
Other
short-
Securities Interest- term Long-
(in millions) available Other bearing borrow- term
Dec 31, 1999 for sale Loans assets deposits ings debt(a) Total
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps(b)
Pay Variable
Unrealized Gain $ -- $ -- $-- $ 44 $ 3 $ 25 $ 72
Unrealized (Loss) -- (2) -- (256) (3) (171) (432)
--------------------------------------------------------------------------------------------------------------
Pay Variable Net -- (2) -- (212) -- (146) (360)
--------------------------------------------------------------------------------------------------------------
Pay Fixed
Unrealized Gain 1 -- -- 58 -- 7 66
Unrealized (Loss) -- -- -- (17) -- -- (17)
--------------------------------------------------------------------------------------------------------------
Pay Fixed Net 1 -- -- 41 -- 7 49
--------------------------------------------------------------------------------------------------------------
Total Unrealized
Gain 1 -- -- 102 3 32 138
--------------------------------------------------------------------------------------------------------------
Total Unrealized
(Loss) -- (2) -- (273) (3) (171) (449)
--------------------------------------------------------------------------------------------------------------
Total Net $ 1 $ (2) $-- $(171) $ -- $(139) $(311)
==============================================================================================================
Forward Rate Agreements
Unrealized Gain $ 1 $ -- $-- $ -- $ -- $ -- $ 1
Unrealized (Loss) -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------------
Net $ 1 $ -- $-- $ -- $ -- $ -- $ 1
==============================================================================================================
Currency Swaps and Forwards
Unrealized Gain $ 136 $ -- $-- $ -- $ -- $ 54 $ 190
Unrealized (Loss) -- (1) -- -- -- (24) (25)
--------------------------------------------------------------------------------------------------------------
Net $ 136 $ (1) $-- $ -- $ -- $ 30 $ 165
==============================================================================================================
Other Contracts
Unrealized Gain $ -- $ -- $-- $ -- $ -- $ -- $ --
Unrealized (Loss) -- -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------------
Net $ -- $ -- $-- $ -- $ -- $ -- $ --
==============================================================================================================
Total Unrealized
Gain $ 138 $ -- $-- $ 102 $ 3 $ 86 $ 329
Total Unrealized
(Loss) -- (3) -- (273) (3) (195) (474)
--------------------------------------------------------------------------------------------------------------
Total Net $ 138 $ (3) $-- $(171) $ -- $(109) $(145)
==============================================================================================================
</TABLE>
(a) Includes trust preferred capital securities.
(b) Includes swaps with embedded options to cancel.
<PAGE>
26
END-USER DERIVATIVES (continued)
For pay variable and pay fixed interest rate swaps entered into as an end user,
the weighted average receive rate and pay rate (interest rates were based on the
weighted averages of both U.S. and non-U.S. currencies) by maturity and
corresponding notional amounts were as follows ($ in millions):
<TABLE>
<CAPTION>
At June 30, 2000
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>
2000 $ 5,511 6.58% 6.67% $ 242 6.77% 6.11% $ 5,753
2001-2002 3,191 6.77 6.46 441 6.67 6.55 3,632
2003-2004 1,206 6.45 6.52 166 5.94 6.71 1,372
2005 and thereafter 6,366 6.73 6.54 601 6.41 6.56 6,967
-----------------------------------------------------------------------------------------------------------------------------------
Total $16,274 $ 1,450 $17,724
====================================================================================================================================
</TABLE>
All rates were those in effect at June 30, 2000. Variable rates are primarily
based on LIBOR or Federal funds rate and may change significantly, affecting
future cash flows.
<TABLE>
<CAPTION>
At December 31, 1999
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>
2000 $23,569 5.79% 5.78% $ 3,066 6.09% 5.82% $26,635
2001-2002 3,194 6.45 5.96 316 6.46 6.16 3,510
2003-2004 1,301 6.26 5.98 168 6.33 6.23 1,469
2005 and thereafter 6,240 6.36 6.26 550 6.24 6.24 6,790
-----------------------------------------------------------------------------------------------------------------------------------
Total $34,304 $ 4,100 $38,404
===================================================================================================================================
</TABLE>
All rates were those in effect at December 31, 1999. Variable rates are
primarily based on LIBOR or Federal funds rate and may change significantly,
affecting future cash flows.
<PAGE>
27
REGULATORY CAPITAL
The Corporation and its banking subsidiaries are subject to various regulatory
capital requirements administered by the federal banking agencies. The Federal
Reserve Board's ("FRB") risk-based capital guidelines address the capital
adequacy of bank holding companies and banks (collectively, "banking
organizations"). These guidelines include a definition of capital, a framework
for calculating risk-weighted assets, and minimum risk-based capital ratios to
be maintained by banking organizations. A banking organization's risk-based
capital ratios are calculated by dividing its qualifying capital by its
risk-weighted assets. The FRB also has a minimum Leverage ratio that is used as
a supplement to the risk-based capital ratios in evaluating the capital adequacy
of banks and bank holding companies. The Leverage ratio is calculated by
dividing Tier 1 Capital by adjusted quarterly average assets. The Corporation's
1999 Annual Report on Form 10-K, on pages 11 and 40, provides a detailed
discussion of these guidelines and regulations.
Based on their respective regulatory capital ratios at June 30, 2000, both the
Corporation and Bankers Trust Company ("BTCo") are well capitalized, as defined
in the applicable regulations.
The Corporation's and BTCo's ratios are presented in the table below.
<TABLE>
<CAPTION>
FRB
Minimum To Be Well
Actual Actual for Capitalized
as of as of Capital Under
June 30, December 31, Adequacy Regulatory
2000 1999 Purposes Guidelines
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Corporation
Risk-Based Capital Ratios
Tier 1 Capital 10.6% 10.4% 4.0% 6.0%
Total Capital 17.9% 18.4% 8.0% 10.0%
Leverage Ratio 7.0% 7.3% 3.0% N/A
BTCo
Risk-Based Capital Ratios
Tier 1 Capital 19.6% 16.5% 4.0% 6.0%
Total Capital 22.0% 18.9% 8.0% 10.0%
Leverage Ratio 13.8% 12.3% 3.0% 5.0%
</TABLE>
N/A Not Applicable
<PAGE>
28
REGULATORY CAPITAL (continued)
The following are the essential components used in calculating the Corporation's
and BTCo's risk-based capital ratios:
<TABLE>
<CAPTION>
Actual as of Actual as of
June 30, December 31,
(in millions) 2000 1999
-----------------------------------------------------------------------------------------
<S> <C> <C>
Corporation
Tier 1 Capital $ 4,445 $ 4,462
Tier 2 Capital 3,048 3,399
-----------------------------------------------------------------------------------------
Total Capital $ 7,493 $ 7,861
=========================================================================================
Total risk-weighted assets $41,819 $42,823
=========================================================================================
BTCo
Tier 1 Capital $ 5,852 $ 5,710
Tier 2 Capital 705 851
-----------------------------------------------------------------------------------------
Total Capital $ 6,557 $ 6,561
=========================================================================================
Total risk-weighted assets $29,811 $34,657
=========================================================================================
</TABLE>
Comparing June 30, 2000 to December 31, 1999, the Corporation's Tier 1 Capital
ratio increased 20 basis points due primarily to the decrease in risk-weighted
assets of $1.0 billion. Risk-weighted assets decreased principally because
positions were liquidated or transferred to other Deutsche Bank affiliates. The
Total Capital ratio decreased 50 basis points due to the decline of $368 million
in Total Capital. The leverage ratio decreased 30 basis points due to the
increase of $2.1 billion in quarterly average assets in the non-bank
subsidiaries of the Corporation. The increase was comprised of low risk-weighted
assets such as deposits with banks and trading assets.
BTCo's Tier 1 Capital ratio increased 310 basis points due to a reduction in
risk-weighted assets of $4.8 billion and an increase in Tier 1 Capital of $142
million. Total Capital ratio increased 310 basis points due to the reduction in
risk-weighted assets. The Leverage ratio increased 150 basis points primarily
due to the significant reduction of $4 billion in quarterly average assets.
<PAGE>
29
RISK MANAGEMENT
Market risk is the risk of losses in the value of the Corporation's portfolio
due to movements in market prices and rates. Market risk arises from the
Corporation's investment, trading, and client activities. This section discusses
changes in the Corporation's market-risk profile as characterized by the
quantitative information presented on pages 13 to 14 of the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999.
Table 1 below shows the results of statistical measures of loss for the first
six months of 2000 and all of 1999 for the set of financial assets and
liabilities whose values are functions of market traded variables irrespective
of accounting intention. This measure shows the 99th percentile loss potential
of the Firm assuming the Firm's positions are held unchanged for 1 day. Table 2
shows the same information for the subset of these positions that appear as
Trading Assets on the Corporation's balance sheet.
Table 1
BT Corporation Total Value at Risk
(in millions)
<TABLE>
<CAPTION>
Six Months
1999 2000 December 31, June 30,
Risk Class Average Average 1999 2000
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Rate $18.0 $4.3 $ 5.1 $5.2
Currency 2.5 1.5 0.6 1.3
Equity 22.6 33.4 11.7 72.9
Commodity 0.6 -- -- --
Diversification (12.4) (5.3) (4.6) (6.3)
------------------------------------------------------------------------------------------------------------------------------------
Overall Portfolio $31.3 $33.9 $12.8 $73.1
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Table 1 shows that the Corporation's overall market-risk exposure increased on a
spot basis by 471 percent from year-end, which was mainly driven by an increase
in equity risk. The primary risks at June 30, 2000 are equity risk and interest
rate risk. The equity risk is primarily from private equity investments held by
the Corporation. This equity risk increased sharply in the second quarter,
mainly due to market movements in the Corporation's private equity investments.
The interest rate risk stems mainly from the loan trading, loan syndication and
loan securitization businesses.
<PAGE>
30
RISK MANAGEMENT (continued)
Table 2
BT Corporation Trading Value at Risk
(in millions)
<TABLE>
<CAPTION>
Six Months
1999 2000 December 31, June 30,
Risk Class Average Average 1999 2000
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Rate $11.1 $4.2 $5.0 $5.1
Currency 2.3 1.5 0.6 1.3
Equity 8.7 7.2 5.8 2.5
Commodity 0.6 -- -- --
Diversification (7.0) (3.8) (3.7) (3.0)
------------------------------------------------------------------------------------------------------------------------------------
Overall Portfolio $15.7 $9.1 $7.7 $5.9
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Table 2 shows that the Corporation's June 30th risk levels from Trading Assets
decreased by 23 percent on a spot basis from December 31, 1999 due to the
ongoing reorganization and integration into Deutsche Bank.
LIQUIDITY
Liquidity is the ability to have funds available at all times to meet the
commitments of the Corporation. The Corporation's liquidity process has become
an integral part of Deutsche Bank's global liquidity process. Management's
policy is designed to maintain Deutsche Bank's ability to fund assets and meet
any contractual financial obligations on a timely basis at a fair market cost
under any market conditions. While Deutsche Bank and the Corporation manage
their liquidity positions on a day-to-day basis to meet ongoing funding needs,
the planning and management process also encompasses contingency planning to
address even the most severe liquidity events.
Short-term unsecured financing for the Corporation is available under an
uncommitted credit line with its parent, Deutsche Bank. At June 30, 2000, this
credit line totaled approximately $5 billion. Of this amount, approximately $4
billion was drawn.
<PAGE>
31
NONPERFORMING ASSETS
The components of cash basis loans, renegotiated loans, other real estate and
other nonperforming assets are shown below ($ in millions).
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-----------------------------------------------------------------------------------
<S> <C> <C>
CASH BASIS LOANS
Domestic
Commercial and industrial $661 $495
Secured by real estate 33 67
Financial institutions 10 11
-----------------------------------------------------------------------------------
Total domestic 704 573
-----------------------------------------------------------------------------------
International
Commercial and industrial 68 132
Secured by real estate 10 10
Other 19 22
-----------------------------------------------------------------------------------
Total international 97 164
-----------------------------------------------------------------------------------
Total cash basis loans $801 $737
===================================================================================
Ratio of cash basis loans to total gross loans 3.7% 3.7%
===================================================================================
Ratio of allowance for credit losses-loans to
cash basis loans 52% 67%
===================================================================================
RENEGOTIATED LOANS $-- $11
===================================================================================
OTHER REAL ESTATE $108 $88
===================================================================================
OTHER NONPERFORMING ASSETS $4 $8
===================================================================================
</TABLE>
There were no loans 90 days or more past due and still accruing interest at June
30, 2000 and December 31, 1999.
<PAGE>
32
NONPERFORMING ASSETS (continued)
An analysis of the changes in the Corporation's total cash basis loans during
the first six months of 2000 follows (in millions):
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1999 $737
Net transfers to cash basis loans 243
Net transfers to other real estate (27)
Net paydowns (88)
Charge-offs (43)
Other (21)
-------------------------------------------------------------------------------
Balance, June 30, 2000 $801
===============================================================================
</TABLE>
The Corporation's total cash basis loans amounted to $801 million at June 30,
2000, up $64 million, or 9 percent, from December 31, 1999.
Impaired loans under SFAS 114, were $809 million and $889 million at June 30,
2000 and December 31, 1999, respectively. Included in these amounts were $752
million and $718 million of loans that required a specific allowance of $299
million and $268 million at those same dates, respectively.
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 that were carried on the balance sheet and classified as either cash
basis or renegotiated at June 30 of each year. The rates used in determining the
gross amount of interest which would have been recorded at the original rate
were not necessarily representative of current market rates.
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
--------------------------
(in millions) 2000 1999
---------------------------------------------------------------------------------
<S> <C> <C>
Domestic Loans
Gross amount of interest that would have
been recorded at original rate $35 $5
Less, interest, net of reversals, recognized
in interest revenue 20 2
---------------------------------------------------------------------------------
Reduction of interest revenue 15 3
---------------------------------------------------------------------------------
International Loans
Gross amount of interest that would have
been recorded at original rate 2 11
Less, interest, net of reversals, recognized
in interest revenue -- 8
---------------------------------------------------------------------------------
Reduction of interest revenue 2 3
---------------------------------------------------------------------------------
Total reduction of interest revenue $17 $6
=================================================================================
</TABLE>
<PAGE>
33
RELATED PARTY TRANSACTIONS
The Corporation has entered into various related party transactions with
Deutsche Bank and its affiliated entities. For further discussion, see page 58
of the Corporation's 1999 Annual Report on Form 10-K.
The Corporation also has related party balances with Deutsche Bank or affiliated
companies. These balances generally include interest-bearing deposits with
banks, securities purchased under resale agreements, securities borrowed,
securities loaned and securities sold under repurchase agreements, other
short-term borrowings, and derivative contracts. These transactions are entered
into in the ordinary course of business.
<TABLE>
<CAPTION>
Included in the Corporation's financial statements were the following balances
with such affiliates.
(in millions) June 30, 2000 December 31, 1999
------------------------------------------------------------------------------------------
<S> <C> <C>
Interest-earning assets $16,137 $10,843
Noninterest-earning assets 1,482 1,147
Interest-bearing liabilities 15,610 6,568
Noninterest-bearing liabilities 1,508 139
</TABLE>
ACCOUNTING DEVELOPMENTS
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS 133, as further amended by SFAS 138 in June 2000,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires companies to recognize all derivatives on the
balance sheet as assets or liabilities measured at fair value. SFAS 137 deferred
the effective date of SFAS 133 until January 1, 2001 for calendar year
companies. Depending on the underlying risk management strategy, the accounting
for these products under the new standard could affect reported earnings and
balance sheet accounts. The Corporation continues to evaluate the potential
impact of the new standard as plans for implementation proceed.
<PAGE>
34
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Risk Management" on page 29 for Quantitative and Qualitative
Disclosures About Market Risk.
OTHER DEVELOPMENTS
Michael Dobson resigned as director of the Corporation and Bankers Trust Company
effective April 27, 2000. Dr. Ronaldo H. Schmitz resigned as director of the
Corporation and Bankers Trust Company effective June 30, 2000. Robert B.
Allardice III was elected a director of the Corporation and Bankers Trust
Company effective July 1, 2000.
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>
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 instruments defining the rights
of security holders issued by Bankers Trust Corporation or
its subsidiaries.
(12) Statement re Computation of Ratios
(27) Financial Data Schedule
(b) Reports on Form 8-K - Bankers Trust Corporation did not file any reports on
Form 8-K during the quarter ended June 30, 2000.
<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 August 14, 2000.
BANKERS TRUST CORPORATION
BY: /S/ RONALD HASSEN
---------------------------
RONALD HASSEN
Senior Vice President, Controller
and Principal Accounting Officer
<PAGE>
37
BANKERS TRUST CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED June 30, 2000
EXHIBIT INDEX
(4) Instruments Defining the Rights of Security
Holders, Including Indentures
(v) - Long-Term Debt Indentures (1)
(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
[FN]
(1) 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 Corporation or its subsidiaries.
</FN>
