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Russia burns Bankers Trust
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September 1, 1998: 1:10 p.m. ET
$350M lost so far in 3Q, Bankers Trust blames loss on Russia
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NEW YORK (CNNfn) - Proving it is no more insulated from Russia's economic crisis than its rivals, Bankers Trust said Tuesday it is posting heavy losses for the first few weeks of the current quarter.
Bankers Trust , the nation's seventh-largest U.S. bank holding company, reported that its trading results so far for the third quarter of 1998 result in a pre-tax loss of approximately $350 million.
The loss includes trading-related net interest income and losses on securities available for sale.
According to the company, the downturn is due largely to charges that limit the company's amount of exposure to Russian Federation securities to 15 percent of face value.
In the third quarter to date, Bankers Trust has accrued a $100 million credit provision, primarily reflecting conditions in Russia and Asia. The company also charged $10 million to its credit loss allowance relating to Russian assets through August.
As of Aug. 31, the bank's remaining Russian asset exposure was approximately $350 million. About 50 percent of that amount is supported by cash flows generated in Western Europe.
Bankers Trust has assets of more than $170 billion and total stockholders' equity of $5.5 billion as of June 30, 1998.
Wall Street Tuesday did not take kindly to the news. Shares of the company (BT) fell 4-1/4, or nearly 6 percent, to 70-1/16 on the New York Stock Exchange.
Last week, BankAmerica Corp. (BAC) reported 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 year-to-date trading losses, including net interest income associated with trading activities, now stands at about $315 million.
The news followed a report by Republic New York Corp., the parent of Republic National Bank of New York, which warned 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 (RNB) also said it will take a $45 million charge 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.
Even so, most analysts say banks that invest into Russia should rebound from the impact of the effective ruble devaluation earlier this month.
Analysts also say that only a handful of the largest banks have any exposure to Russia at all. Among them are BankAmerica, J.P. Morgan & Co. Inc. (JPM), Citicorp (CCI), Bankers Trust Corp. and Chase Manhattan (CMB).
Most say even those will remain largely unaffected by the devaluation of the Russian ruble last month.
The losses are expected to affect the banks' third-quarter earnings, but not have a significant impact on their year-end results. 
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