-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KqleqWkQDezfXbqLEKfWNIl633FFuy7LoSMcP246sSTVbXIKd2zWfnDWpNzZbXII uqHOq3clX32+eSHldBLbVg== 0000950130-96-001283.txt : 19960419 0000950130-96-001283.hdr.sgml : 19960419 ACCESSION NUMBER: 0000950130-96-001283 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960415 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960418 SROS: AMEX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANKERS TRUST NEW YORK CORP CENTRAL INDEX KEY: 0000009749 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 136180473 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05920 FILM NUMBER: 96548376 BUSINESS ADDRESS: STREET 1: 280 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2122502500 MAIL ADDRESS: STREET 1: 280 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: BT NEW YORK CORP DATE OF NAME CHANGE: 19671107 8-K 1 FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) April 15, 1996 -------------- BANKERS TRUST NEW YORK CORPORATION ------------------------------------------------------------ (Exact name of registrant as specified in its charter) NEW YORK ------------------------------------------------------------ (State or other jurisdiction of incorporation) 1-5920 13-6180473 - ------------------------------------ ------------------------------- (Commission file number) IRS employer identification no.) 280 PARK AVENUE, NEW YORK NEW YORK 10017 - ---------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 250-2500 -------------- ITEM 5. OTHER EVENTS The purpose of this Current Report on Form 8-K is to file certain information to be incorporated into currently effective registration statements filed by the Registrant with the Securities and Exchange Commission under the Securities Act of 1933, as amended. Such information contained in the Registrant's Press Releases dated April 15 and April 16, 1996, is described below and is incorporated herein by reference. Also incorporated herein is certain additional financial information relating to an historical analysis of the Registrant's net income by Organizational Unit for the years ended December 31, 1992 through 1995, and quarterly data for 1992 through 1995 and the 1st quarter of 1996. See also page 11 of Registrant's press release dated April 16, 1996 for Organizational Unit definitions and assumptions. 1. Review of certain financial information. 2. The unaudited consolidated financial position of Bankers Trust New York Corporation and its subsidiaries at March 31, 1996 and 1995 and the audited consolidated financial position of Bankers Trust New York Corporation and its subsidiaries at December 31, 1995, and its unaudited consolidated results of operations for the three-month periods ended March 31, 1996 and 1995 and December 31, 1995. In the opinion of the Registrant's management, all material adjustments necessary for a fair presentation of the Corporation's consolidated financial position at March 31, 1996 and 1995 and December 31, 1995, and its consolidated results of operations for the three-month periods ended March 31, 1996 and 1995 and December 31, 1995 have been made. All such adjustments were of a normal recurring nature. The results of operations for the three-month period ended March 31, 1996 is not necessarily indicative of the results of operations for the full year or any other interim period. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits 99.1 Press Release dated April 15, 1996, announcing expected election of Frank N. Newman to the position of Chairman of the Board of Bankers Trust New York Corporation and Bankers Trust Company. 99.2 Press Release of the Registrant dated April 16, 1996 disclosing 1st quarter financial results. 99.3 Additional financial information. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. BANKERS TRUST NEW YORK CORPORATION By /s/ Gordon S. Calder, Jr. ----------------------------------- Gordon S. Calder, Jr. Assistant Secretary Date: April 18, 1996 BANKERS TRUST NEW YORK CORPORATION FORM 8-K DATED APRIL 15, 1996 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 99.1 Press Release dated April 15, 1996, announcing expected election of Frank N. Newman to the position of Chairman of the Board of Bankers Trust New York Corporation and Bankers Trust Company. 99.2 Press Release of the Registrant dated April 16, 1996 disclosing 1st quarter financial results. 99.3 Additional financial information. EX-99.1 2 PRESS RELEASE DATED APRIL 15, 1996 EXHIBIT 99.1 NEWMAN TO SUCCEED SANFORD AS BANKERS TRUST CHAIRMAN New York, April 15, 1996 -- Frank N. Newman, president and chief executive officer of Bankers Trust New York Corporation and Bankers Trust Company, is scheduled to be formally named to succeed Charles. S. Sanford, Jr., as chairman of the two companies at a Board of Directors meeting following tomorrow's annual meeting of Bankers Trust shareholders. Mr. Sanford had announced in May of 1995 his intention to retire by mid- 1996, having advised Bankers Trust's Board of Directors two years earlier of his plans to step down by age 60. He joined Bankers Trust in 1961 and headed what is now the Trading and Sales business before being elected president in 1983. He was elected deputy chairman in 1986 and chairman in 1987. Mr. Newman, who will serve as chairman, president and chief executive officer, joined Bankers Trust as senior vice chairman in September of 1995 and was named president and chairman-designate the following month. He assumed the chief executive officer responsibilities from Mr. Sanford on January 1, 1996. Mr. Newman was previously deputy secretary of the Treasury and, earlier, vice chairman and chief financial officer of BankAmerica Corporation. In a joint statement, Mr. Newman and Mr. Sanford said: "The fundamental strengths of the franchise -- solid capital, quality services, a truly global network and extremely capable and innovative people -- provide an exceptional platform for the future. The firm's commitment now is to build on those strengths, serve its clients faithfully and professionally, and return to competitive earnings performance." -30- For additional information, contact Tom Parisi, Bankers Trust, (212) 250 7235. This and other press releases are available at http://www.bankerstrust.com. EX-99.2 3 PRESS RELEASE DATED APRIL 16, 1996 EXHIBIT 99.2 TUESDAY, APRIL 16, 1996 BANKERS TRUST REPORTS IMPROVED FIRST QUARTER EARNINGS OF $138 MILLION, OR $1.52 EARNINGS PER SHARE New York, April 16, 1996 -- Bankers Trust New York Corporation earned $138 million, or $1.52 primary earnings per share, in the first quarter of 1996. The first quarter earnings improved from both the fourth quarter 1995 results of $126 million, or $1.36 primary earnings per share, and from the first quarter 1995 loss of $157 million, or $2.11 primary loss per share. Return on common equity increased to 12% in the first quarter of 1996. "Strong performance from several business lines contributed to Bankers Trust's improved first quarter results," said Frank N. Newman, chief executive officer. "Our Investment Banking business had a strong quarter, and Trading & Sales, geographically-based businesses in Australia/New Zealand and Latin America, and our Client Processing Services business all turned in solid results. A substantial increase in new transaction revenue with clients returned our restructured Risk Management Products & Services business to modest profitability in the quarter. Our Investment Management and Asia businesses also returned to profitability. The first quarter's results were not affected by unusual gains or charges." "We were also pleased to see renewed strength in the revenue category which for accounting purposes is called 'trading'. A large part of the increase in the quarter was due to growth in client transaction activity in our Risk Management Products & Services, and Investment Banking businesses. In all, Bankers Trust's first quarter results put us in an excellent position to achieve our planned return to more competitive earnings performance. As we move ahead, our continuing commitment is to provide our clients with effective, innovative products and services of the highest quality," Mr. Newman added. ORGANIZATIONAL HIGHLIGHTS In recent years a Business Function approach was used to analyze the principal components of the financial performance of the Corporation's businesses. As reported in the Corporation's 1995 Annual Report, the Corporation has changed this financial analysis to reflect more closely its organizational structure. The following table analyzes net income (loss) by Organizational Units:
Net Income (Loss) by Organizational Unit First Fourth FIRST Quarter Quarter QUARTER ($ in millions) 1995 1995 1996 - -------------------------------------------- -------- -------- -------- Investment Banking $ 24 $ 158 $ 77 Risk Management Products & Services (30) (44) 1 Trading & Sales 11 25 24 Investment Management (4) (5) 1 Client Processing Services 20 21 21 Australia/New Zealand 22 33 24 Asia (3) (10) 6 Latin America (108) (11) 19 Corporate (including unallocated overhead) (89) (41) (35) - -------------------------------------------- ----- ----- ----- Net Income (Loss) $(157) $ 126 $ 138 ============================================ ===== ===== =====
Note: See page 11 for Organizational Unit definitions and assumptions. The Investment Banking business produced net income of $77 million in the first ------------------ quarter of 1996, compared with $158 million in the fourth quarter and $24 million in the first quarter of the previous year. Fourth quarter 1995 results included a $102 million after-tax gain on the sale of a major portion of the Corporation's investment in Northwest Airlines Corporation; this quarter's results, while including gains from private equity investments, did not benefit from any such large items. 2 Risk Management Products & Services produced net income of $1 million in the - ----------------------------------- first quarter of 1996, a significant improvement from the losses seen in the business during 1995. The first quarter improvement was due to an increase in new business revenue as the Corporation continues its client-focused effort to restructure its Risk Management Products & Services business. Net income from the Trading & Sales business was down slightly from the fourth --------------- quarter of 1995, but was up significantly from the first quarter of 1995. The Corporation's Investment Management business, which for reporting purposes --------------------- does not include investment management activities in Australia/New Zealand, reported a small net income in the first quarter of 1996, a modest improvement from previous quarters. The Corporation has restructured this business as well, and is implementing a development plan to improve results in the future. Client Processing Services produced $21 million of net income in the first - -------------------------- quarter of 1996, consistent with the first and fourth quarters of 1995. Australia/New Zealand business net income was $24 million in the first quarter - --------------------- of 1996, down from the fourth quarter of 1995, which included particularly strong corporate finance results. Net income was up $2 million from the first quarter of 1995. Asia net income was $6 million in the first quarter of 1996, as compared with - ---- losses in the first and fourth quarters of 1995. The increased income was primarily due to improved revenue in Thailand and Japan. Latin America net income was $19 million in the first quarter of 1996, due to - ------------- strong trading results and improved revenue from our Chilean insurance subsidiaries. The first quarter 1995 net loss was the result of certain client risk management and trading positions that were affected by extreme volatility and illiquidity in Latin American securities markets after the Mexican peso devaluation. These positions were resolved during the first half of 1995. QUARTERLY FINANCIAL COMPARISONS FIRST QUARTER 1996 VERSUS FOURTH QUARTER 1995 Net income of $138 million for the first quarter of 1996 was up from the $126 million earned in the fourth quarter of 1995, and was not affected by unusual gains or charges. The fourth quarter of 1995 included three unusual items as described below. First quarter 1996 trading revenue increased $164 million over the fourth quarter of 1995. The prior year's fourth quarter included a $51 million charge to trading revenue from settlements of old leveraged derivative transactions. Increased client transaction activity in the 3 Risk Management Products & Services business and the Investment Banking business accounted for most of the remaining increase in trading revenue. (For comparisons of trading revenue by Organizational Unit see page 6, below). Securities available for sale gains decreased $136 million from the fourth quarter of 1995. The prior quarter included a $145 million pre-tax gain on the sale of a substantial portion of the Corporation's investment in Northwest Airlines Corporation. Within noninterest expenses, agency and professional service fees decreased $44 million from the fourth quarter of 1995, which included approximately $35 million of legal expenses in connection with leveraged derivative transactions issues. FIRST QUARTER 1996 VERSUS FIRST QUARTER 1995 The $138 million earned in the first quarter of 1996 showed a significant improvement from the $157 million net loss recorded in the prior year's first quarter. Included in that loss was a $35 million after-tax severance-related charge. Total trading revenue and trading-related net interest revenue was $277 million for the first quarter of 1996, compared with a $77 million loss for the comparable period of 1995. The first quarter of 1995 net loss was primarily the result of extreme price fluctuations and illiquidity in the markets for Latin American securities as discussed earlier. CREDIT QUALITY Credit quality remained high in the quarter. Cash basis loans declined from $744 million in the fourth quarter of 1995, to $715 million in the first quarter of 1996. There were no material changes in the Corporation's residual leveraged derivative exposures. Based on an analysis of the potential outcome of outstanding issues relating to leveraged derivative transactions, management continues to believe that the expected financial impact should be covered by existing reserves. CAPITAL Total stockholders' equity at March 31, 1996 was $5.055 billion, an increase of $71 million and $387 million compared with December 31, 1995 and March 31, 1995, respectively. The Corporation estimates that its ratios of Tier 1 Capital and Total Capital to risk-adjusted assets were approximately 8.00% and 13.10%, respectively, at March 31, 1996. - ------------------------------------------------------------------------------- For additional information, contact Douglas Kidd, 212 250-7225 or Tom Parisi, 212 250-7235 (Media); Howard Schneider 212 250-7908 (Investors). Bankers Trust news releases, including quarterly results, are available on the Internet (http://www.bankerstrust.com). The remainder of this release contains financial statements and tables and Organizational Unit definitions and assumptions. 4 BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (in millions, except per share data) (unaudited)
First Fourth FIRST Quarter Quarter QUARTER 1995 1995 1996 -------- ------- ------- NET INTEREST REVENUE Interest revenue $1,353 $1,457 $1,590 Interest expense 1,171 1,248 1,377 - --------------------------------------------------- ------ ------ ------ Net interest revenue 182 209 213 Provision for credit losses 14 10 5 - --------------------------------------------------- ------ ------ ------ Net interest revenue after provision for credit losses 168 199 208 - --------------------------------------------------- ------ ------ ------ NONINTEREST REVENUE Trading (78) 83 247 Fiduciary and funds management 171 186 183 Corporate finance fees 72 125 86 Other fees and commissions 73 79 87 Net revenue from equity investment transactions 26 22 21 Securities available for sale gains 2 151 15 Insurance premiums 49 58 62 Other 27 35 49 - --------------------------------------------------- ------ ------ ------ Total noninterest revenue 342 739 750 - --------------------------------------------------- ------ ------ ------ NONINTEREST EXPENSES Salaries 208 206 201 Incentive compensation and employee benefits 133 185 227 Agency & other professional service fees 76 104 60 Communication & data services 47 44 46 Occupancy, net 41 32 37 Furniture and equipment 42 40 41 Travel and entertainment 23 21 18 Provision for policyholder benefits 56 69 72 Other 58 57 59 Provision for severance-related costs 50 - - - --------------------------------------------------- ------ ------ ------ Total noninterest expenses 734 758 761 - --------------------------------------------------- ------ ------ ------ Income (loss) before income taxes (224) 180 197 Income taxes (benefit) (67) 54 59 - --------------------------------------------------- ------ ------ ------ NET INCOME (LOSS) $ (157) $ 126 $ 138 =================================================== ====== ====== ====== NET INCOME (LOSS) APPLICABLE TO COMMON STOCK $ (165) $ 111 $ 123 =================================================== ====== ====== ====== Cash dividends declared per common share $1.00 $1.00 $1.00 =================================================== ====== ====== ====== EARNINGS (LOSS) PER COMMON SHARE: PRIMARY $(2.11) $1.36 $1.52 =================================================== ====== ====== ====== FULLY DILUTED $(2.11) $1.36 $1.51 =================================================== ====== ====== ======
Certain prior period amounts have been reclassified to conform to the current presentation. 5 TRADING REVENUE AND TRADING-RELATED NET INTEREST REVENUE
First Fourth FIRST Quarter Quarter QUARTER ($ in millions) 1995 1995 1996 - ---------------------------------------- -------- -------- ------- Trading Revenue by Organizational Unit Investment Banking $ (9) $ 20 $ 33 Risk Management Product & Services 44 41 105 Trading and Sales 25 40 35 Investment Management 1 (1) - Client Processing Services 1 2 2 Australia/New Zealand 22 10 24 Asia (7) 5 13 Latin America (136) 12 35 Corporate (19) (46) - - ---------------------------------------- ----- ----- ----- Total Trading Revenue $ (78) $ 83 $ 247 ======================================== ===== ===== ===== Trading Related Net Interest Revenue $ 1 $ 13 $ 30 ======================================== ===== ===== ===== Total Trading and Trading-Related Net Interest Revenue $ (77) $ 96 $ 277 ======================================== ===== ===== =====
Note: The Corporation accounts for revenues from a wide range of business activities as "trading revenue". The Organizational Unit presentation of trading revenue in the table above includes revenue from business activities as follows: Investment Banking trading revenues are produced in secondary market ------------------ activities with clients, primarily in sectors where the Corporation also serves as underwriter. Also included here are revenues arising from a small portion of private equity investments that are accounted for on a mark-to-market basis. Risk Management Products & Services trading revenues are produced ----------------------------------- primarily from new derivative transactions with clients and from revenues resulting from managing the risks the Corporation assumes on such transactions. Trading & Sales trading revenues are produced by proprietary position- --------------- taking, including on an arbitraged basis, as well as market making and other client activities. Geographically-Based Businesses produce trading revenues from ------------------------------- all the above types of activities. Corporate Unit trading revenues include various transactions which, for management accounting purposes, are not recorded in Organizational Units. An example is the $51 million charge-off to revenue associated with leveraged derivatives in the fourth quarter of 1995. 6 NET INTEREST REVENUE
First Fourth FIRST Quarter Quarter QUARTER ($ in millions) 1995 1995 1996 - ----------------------------------------- --------- --------- --------- Nontrading-related net interest revenue $ 181 $ 196 $ 183 Trading-related net interest revenue 1 13 30 - ----------------------------------------- -------- -------- -------- Net interest revenue $ 182 $ 209 $ 213 ========================================= ======== ======== ======== Average rates (fully taxable basis) Yield on interest-earning assets 7.09% 6.72% 7.49% Cost of interest-bearing liabilities 6.28% 5.87% 6.68% Interest rate spread .81% .85% .81% Net interest margin 1.02% .99% 1.02% ========================================= ======== ======== ======== Average balances Loans $ 11,683 $ 12,823 $ 12,394 Total interest-earning assets $ 78,228 $ 86,315 $ 85,576 Total assets $104,539 $114,853 $113,671 Total interest bearing liabilities $ 75,642 $ 84,335 $ 82,912 ========================================= ======== ======== ========
7 BANKERS TRUST NEW YORK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ($ in millions) (unaudited)
March 31, December 31, MARCH 31, 1995 1995 1996 ----------- ----------- ---------- ASSETS Cash and due from banks $ 1,603 $ 2,337 $ 1,181 Interest-bearing deposits with banks 2,900 2,023 1,377 Federal funds sold 2,115 854 1,038 Securities purchased under resale agreements 15,040 13,206 15,670 Securities borrowed 10,873 10,951 15,390 Trading assets: Government securities 20,094 20,704 18,345 Corporate debt securities 4,012 5,648 5,670 Equity securities 3,639 5,098 6,024 Swaps, options and other derivative contracts 18,581 10,555 10,330 Other trading assets 5,277 5,888 5,136 - ------------------------------------------------ -------- -------- -------- Total trading assets 51,603 47,893 45,505 Securities available for sale 6,019 6,283 6,880 Loans 11,731 12,633 13,088 Allowance for credit losses (1,245) (992) (987) Accounts receivable and accrued interest 2,034 4,220 4,072 Other assets 4,689 4,594 4,930 - ------------------------------------------------ -------- -------- -------- Total $107,362 $104,002 $108,144 ================================================ ======== ======== ======== LIABILITIES Noninterest-bearing deposits Domestic offices $ 2,352 $ 2,687 $ 1,997 Foreign offices 532 605 545 Interest-bearing deposits Domestic offices 5,433 5,402 5,824 Foreign offices 16,279 17,014 14,190 - ------------------------------------------------ -------- -------- -------- Total deposits 24,596 25,708 22,556 Trading liabilities: Securities sold, not yet purchased Government securities 9,931 11,092 11,897 Equity securities 2,230 3,262 3,918 Other trading liabilities 139 473 331 Swaps, options and other derivative contracts 17,083 11,264 10,903 - ------------------------------------------------ -------- -------- -------- Total trading liabilities 29,383 26,091 27,049 Securities sold under repurchase agreements 18,631 15,247 23,209 Other short-term borrowings 16,396 15,761 12,493 Accounts payable and accrued expenses 4,137 3,931 4,665 Other liabilities 2,680 2,736 2,742 Long-term debt 6,621 9,294 10,125 - ------------------------------------------------ -------- -------- -------- Total liabilities 102,444 98,768 102,839 - ------------------------------------------------ -------- -------- -------- PREFERRED STOCK OF SUBSIDIARY 250 250 250 - ------------------------------------------------ -------- -------- -------- STOCKHOLDERS' EQUITY Preferred stock 639 865 866 Common stock 84 84 84 Capital surplus 1,306 1,302 1,304 Retained earnings 3,243 3,316 3,351 Common stock in treasury, at cost (393) (336) (311) Other stockholders' equity (211) (247) (239) - ------------------------------------------------ -------- -------- -------- Total stockholders' equity 4,668 4,984 5,055 - ------------------------------------------------ -------- -------- -------- Total $107,362 $104,002 $108,144 ================================================ ======== ======== ========
Certain prior period amounts have been reclassified to conform to the current presentation. 8
CAPITAL First Fourth FIRST Quarter Quarter QUARTER 1995 1995 1996 -------- -------- -------- FOR THE QUARTER Return on Average Common Stockholders' Equity N/M 10.57% 11.89% Return on Average Total Assets N/M .44% .49% PER COMMON SHARE Earnings (Loss): Primary $ (2.11) $ 1.36 $ 1.52 Fully Diluted $ (2.11) $ 1.36 $ 1.51 Cash Dividends Declared $ 1.00 $ 1.00 $ 1.00 Market Price, End of Period $ 52.25 $ 66.50 $ 70.875 Book Value, End of Period (1) $ 50.04 $ 50.58 $ 51.06 COMMON SHARES (SHARES IN MILLIONS EXCEPT PAR VALUE) Common stock $1 par value: Authorized, at period end 300.000 300.000 300.000 Issued, at period end 83.679 83.679 83.679 Common stock in treasury, at period end 5.341 4.603 4.278 Average Common and Common Equivalent Shares Outstanding-Primary (2) 78.346 81.322 80.896 Average Common and Common Equivalent Shares Outstanding Assuming Full Dilution (2) 78.346 81.415 81.560 CAPITAL RATIOS, END OF PERIOD Common Stockholders' Equity to Total Assets 3.75% 3.96% 3.87% Total Stockholders' Equity to Total Assets 4.35% 4.79% 4.67% Bankers Trust New York Corporation: Risk-Based Capital Ratios (3) Tier 1 Capital 8.73% 8.51% 8.00% Total Capital 14.20% 13.90% 13.10% Leverage Ratio (3) 5.18% 5.12% 5.30% Bankers Trust Company: Risk-Based Capital Ratios (3) Tier 1 Capital 9.33% 9.47% 9.15% Total Capital 12.31% 12.78% 12.25% Leverage Ratio (3) 5.27% 5.14% 5.50% - --------------------------------------------------------------------------------------
(1) This calculation includes the effect of the vested portion of common shares issuable under deferred stock awards. (2) Common stock equivalents are excluded from the first quarter 1995 as the effect would be anti-dilutive in calculating earnings per share. (3) Regulatory capital ratios at March 31, 1996 are preliminary. N/M Not Meaningful. 9 NONPERFORMING ASSETS AND ALLOWANCE FOR CREDIT LOSSES
March 31, December 31, MARCH 31, 1995 1995 1996 ---------- ------------- ---------- Nonperforming assets (in millions) - ------------------------------------------- Cash basis loans Secured by real estate $ 403 $ 362 $ 351 Real estate related 26 23 31 Highly leveraged 111 153 132 Other 437 206 201 - ------------------------------------------- ------ ------ ----- Total cash basis loans $ 977 $ 744 $ 715 =========================================== ====== ====== ===== Renegotiated loans Secured by real estate $ 90 $ 88 $ 89 Other nonrefinancing country 12 12 - - ------------------------------------------- ------ ------ ----- Total renegotiated loans $ 102 $ 100 $ 89 =========================================== ====== ====== ===== Other real estate $ 265 $ 259 $ 257 =========================================== ====== ====== ===== Other nonperforming assets $ 66 $ 67 $ 67 =========================================== ====== ====== ===== First Fourth FIRST Quarter Quarter QUARTER 1995 1995 1996 ------ ------ ----- Allowance for credit losses (in millions) - ------------------------------------------- Balance, beginning of period $1,252 $1,032 $ 992 Net charge-offs Charge-offs 34 60 28 Recoveries 13 10 18 - ------------------------------------------- ------ ------ ----- Total net charge-offs* 21 50 10 Provision for credit losses 14 10 5 - ------------------------------------------- ------ ------ ----- Balance, end of period $1,245 $ 992 $ 987 =========================================== ====== ====== ===== *Components: Secured by real estate $ 6 $ 11 $ 1 Real estate related 2 - 4 Highly leveraged 20 2 20 Other - 38 (12) Refinancing country (7) (1) (3) - ------------------------------------------- ------ ------ ----- Total $ 21 $ 50 $ 10 =========================================== ====== ====== =====
10 ORGANIZATIONAL UNITS The Corporation delivers a wide range of financial products and services worldwide principally through eight broad Organizational Units. Five units are organized around specific products and services: Investment Banking, Risk Management Products & Services, Trading & Sales, Investment Management, and Client Processing Services. Three additional units are organized to deliver these same types of financial products and services with the unique local expertise necessary to operate successfully in Australia/New Zealand, Asia and Latin America. The Units are described below: Investment Banking: Delivers the Firm's full range of financing, advisory ------------------ and research products and services to corporate, financial institution and investor clients. Services include the underwriting, distribution and trading of public equity and debt (both investment grade and high-yield), private placements and structured finance, as well as merger and acquisition advisory services. The unit is responsible for the Firm's private equity investments. The Corporation's Asset-Based Lending activities, although managed separately, are included in Investment Banking for reporting purposes. Risk Management Products & Services: Assists clients in the management of ----------------------------------- their financial and economic risk. Products and services include interest rate, currency, equity, commodity and credit derivatives, as well as risk management advisory services. This business also manages the Corporation's risk associated with client derivative transactions. Trading & Sales: Provides financial products and services to the --------------- Corporation's clients and enters into securities, currency, commodity, derivatives and funding transactions on a proprietary basis. The unit is responsible for funding the Corporation worldwide, including capital and liquidity management. Investment Management: Manages investments for pension funds, corporations --------------------- and other institutional investors worldwide (the Australian funds management business is reported in the results of Australia/New Zealand). Services provided include management of equities, fixed income securities and other financial instruments in many of the world's major financial markets. The Corporation's Private Banking activities, although managed separately, are included in Investment Management for reporting purposes. Client Processing Services: Gathers, moves and manages assets for -------------------------- institutional clients throughout the world. This unit delivers the Corporation's processing, fiduciary and trust services, such as cash management, custody and clearance, and deposit and credit services, to corporations, financial institutions and governments and their agencies around the world. It also provides retirement services, including 11 recordkeeping and administrative services and portfolio measurement to sponsors of U.S. defined benefit and defined contribution plans. Geographically-Based Businesses: Australia/New Zealand - Provides funds management and corporate finance, and --------------------- financial markets services to local and international clients, and trades for its own account in related markets. Asia - Provides advisory and corporate finance services to financial ---- institutions, governments and both state-owned and privatized businesses. In addition, it engages in arbitrage trading and equity investments. Latin America - Engages in trading and distribution, organization and ------------- underwriting of corporate finance securities, mergers and acquisitions services and private equity investments. In addition, this organizational unit, through its Chilean insurance subsidiaries, underwrites pension-related life and disability insurance and sells pension-related life annuities. Corporate Units include the unallocated costs of corporate staff together with the notional interest income on the Corporation's capital accounts. The Corporate unit also includes a residual portion of the Firm's loans to clients not booked in the business units. In addition to the provision for credit losses there are also various special charges and reserves reflected within Corporate such as the previously disclosed severance charge taken in the first quarter of 1995 and the derivative settlements in the fourth quarter of 1995. Organizational Unit business results are determined based on the Corporation's internal management accounting process, which allocates revenue and expenses among the Organizational Units. Because the Corporation's business is complex in nature and its operations are integrated, it is impractical to segregate respective contributions of the Organizational Units with precision. As a result, estimates and subjective judgments have been made to apportion revenue and expense items. The internal management accounting process, unlike financial accounting in accordance with generally accepted accounting principles, is based on the way the management views its business and is not necessarily comparable with similar information disclosed by other financial institutions. In order to provide comparability from one period to the next, the Corporation will restate this analysis to conform with material changes in the allocation process and/or significant changes in organizational structure. 12 EX-99.3 4 ADDITIONAL FINANCIAL INFORMATION Exhibit 99.3
ANNUAL NET INCOME BY ORGANIZATION - --------------------------------- Unadjusted ($ millions and % of total) A B C D E F G H I ANNUAL - ($ MILLIONS) ANNUAL - % QTR FY92 FY93 FY94 FY95 FY92 FY93 FY94 FY95 1Q96 ------ ------- ------ ------ ------ ------ ------ ------ ------ 1 Investment Banking ($9) $ 97 $135 $326 (1%) 9% 22% 152% 56% 2 Risk Mgmt Products & Services 124 333 163 (74) 19 31 26 (34) 1 3 Trading & Sales 188 466 (95) 82 29 44 (15) 38 17 4 Investment Management 90 26 (30) (10) 14 2 (5) (5) 1 5 Client Processing Services 92 87 98 93 14 8 16 43 15 6 Australia / NZ 143 129 152 102 22 12 25 47 17 7 Asia 32 43 43 (19) 5 4 7 (9) 4 8 Latin America 43 147 109 (120) 7 14 18 (56) 14 9 Corporate (64) (258) 40 (165) (9) (24) 6 (76) (25) ------ ------- ------ ------ ------ ------ ------ ------ ------ 10 Total $639 $1,070 $615 $ 215 100% 100% 100% 100% 100% ====== ======= ====== ====== ====== ====== ====== ====== ======
QUARTERLY NET INCOME BY ORGANIZATION - ------------------------------------ Unadjusted ($ millions) A B C D E F G H I J K Qtly Avgs Quarters 1994 Quarters 1995 Q96 ----------- -------------------------- --------------------------- ------- FY92 FY93 1Q94 2Q94 3Q94 4Q94 1Q95 2Q95 3Q95 4Q95 1Q96 1 Investment Banking ($2) $24 $40 $39 $8 $48 $24 $74 $70 $158 $77 2 Risk Mgmt Products & Services 31 83 92 34 54 (17) (30) (9) 9 (44) 1 3 Trading & Sales 47 117 (73) 7 17 (46) 11 8 38 25 24 4 Investment Management 22 7 6 (2) (20) (14) (4) 2 (3) (5) 1 5 Client Processing Services 23 22 28 27 22 21 20 27 25 21 21 6 Australia / NZ 36 32 39 36 33 44 22 25 22 33 24 7 Asia 8 11 15 12 13 3 (3) 8 (14) (10) 6 8 Latin America 11 37 10 10 64 25 (108) (4) 3 (11) 19 9 Corporate (16) (65) 7 18 (22) 37 (89) (40) 5 (41) (35) ------ ------ ----- ----- ------ ----- ------ ----- ----- ------ ------ 10 Total $160 $268 $164 $181 $169 $101 ($157) $91 $155 $126 $138 ====== ====== ===== ===== ====== ===== ====== ===== ===== ====== ======
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