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Russia stings BankAmerica
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August 28, 1998: 11:31 a.m. ET
B of A trading loss reaches $220M; analysts say damage may be behind it
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NEW YORK (CNNfn) - Following in the footsteps of its East Coast rival Republic New York, BankAmerica Corp. said Friday its trading losses have reached $220 million so far this quarter, due largely to the volatility in global financial markets
The San Francisco-based holding company for Bank of America said quarter-to-date trading losses, including net interest income associated with trading activities, now stands at $220 million, while year-to-date trading related income is about $315 million.
The bank said losses were primarily responsible for reducing its Russian Federation exposure to about $100 million at August 26 from $412 million at June 30.
BankAmerica, with assets of $264 billion, posted net income of $1.725 billion for the first six months of the year.
Analysts say only a handful of the largest banks have any exposure to Russia at all, including BankAmerica, J.P. Morgan & Co. Inc., Citicorp, Bankers Trust Corp. and Chase Manhattan.
Most say even those will remain largely unaffected by the effective devaluation of the Russian ruble last week.
"Everybody can entirely write off their exposure to Russia and this quarter earnings would suffer, but that would be the end of it and things will keep chugging along," said Sean Ryan, bank analyst for Bear Stearns. "It's not just Russia. They are exposed to Asia and Latin America. Pick you debacle."
The overwhelming majority of U.S. banks, however, have no direct Russian exposure.
"Most banks are exposed only to the degree that these issues feed back into the U.S. economy," he said.
Others say the damage to U.S. banks from Russia's financial crisis already has been done. Trading of the Russian ruble was halted Thursday and Friday on the Moscow Interbank Currency Exchange as the central bank moved desperately to stop the currency's slide.
"I think you are seeing the peak of it here in terms of damage," said Goldman Sachs analyst Robert Albertson. "Any [bank] with direct government securities in Russia has felt the damage, but with the exception of Republic New York, I would argue that it shouldn't be significant enough to affect (quarterly results going forward.)"
On Thursday, Republic New York Corp. told investors it will take a $110 million charge in the third quarter due to losses on its Russian investments. The charge will substantially wipe out its earnings for the period.
Republic New York, the parent company of Republic National Bank of New York, also said it will charge $45 million against its allowance for credit losses for Russian defaults. The company valued its position in restructured short-term Russian Treasury bills at 15 cents on the dollar.
Shares of the company (RNB) were down 3-1/16, or nearly 7 percent, at 42-7/16 on the New York Stock Exchange mid-morning Friday.
"This is much bigger than Russia," said Morgan Stanley Dean Witter managing director Art Soter. "The real issue here is that the global economy now is more integrated and good news, along with bad news, travels fast."
As a result, managing risk at home and abroad has become much more complex. Banks, he said, won't be the only ones feeling the financial pinch of emerging market instability.
"Over the course of the next few months we'll start to get third-quarter earnings in and we'll start to see lots of examples of companies getting hurt by market volatility," he said. "There are lots of businesses and lots of markets getting hit by this. It is not just a one-dimensional problem."
Shares of BankAmerica (BAC) were trading up 1/8 at 73-7/8 on the New York Stock Exchange Friday afternoon. 
--by staff writer Shelly K. Schwartz
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