Magazine article American Banker

Trading Profits Seen Boosting N.Y. Banks' Third Quarter

Magazine article American Banker

Trading Profits Seen Boosting N.Y. Banks' Third Quarter

Article excerpt

Third-quarter results of big New York trading banks are expected to get a boost from an unusually volatile summer in the bond and currency markets.

Trading revenues at these and other banks have soared in recent quarters, and another strong performance could buttress the banks' case that hefty trading profits are sustainable, though not necessarily at the recent lofty levels.

Higher Earnings Estimates

A number of Wall Street analysts have already ratcheted up their third-quarter earnings estimates, while others are in the process of reviewing their numbers.

"Clearly, we had a very strong quarter for trading," said Raphael Soifer of Brown Brothers Harriman.

On Wednesday, Mr. Soifer boosted his earnings estimates for the three banks whose bottom lines are the most sensitive to trading results - Bankers Trust New York Corp., Citicorp, and J.P. Morgan & Co.

Mr. Soifer now expects Bankers Trust to earn $2.60 a share in the third quarter, compared with his previous estimate of $2, while he raised his earnings estimates for Citicorp to 75 cents a share from 62 cents, and his Morgan estimate to $2 a share from $1.43.

After jumping $2.125 Wednesday to close at $78.25 a share, Bankers Trust was off 25 cents late in the day Thursday at $78 a share.

Morgan's stock, which rose by $1.875 to $75.75 on Wednesday, fell back yesterday to 75.125, off 62.5 cents. Citicorp, up 37.5 cents at $36.25 Wednesday, gave back 25 cents a share Thursday, falling to $36.

Despite the anticipation of another strong trading quarter, some Wall Street analysts said the exceptional results eventually will fall back to earth.

Just last week, Lawrence Cohn at Painewebber Inc. lowered his investment ratings on Bankers Trust and Morgan to "unattractive" from "neutral," arguing that the "environment for trading gains in the third quarter has been about as good as it possibly can be. …

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