BANKERS TRUST NEW YORK CORPORATION

In the late1970s, Bankers Trust New York Corporation made a decision to exit the retail commercial banking business and transform the institution into an international merchant bank. By early1985, this transition was nearly complete. Therefore, the analysis of the financial performance of Bankers Trust is made through the comparison of such performance in 1980, the year the exit from retail banking began, with the institution's 1984 performance, the year in which the transition was all but completed.

Some bases for this comparison are presented in the case. The assets/equity ratio, for one, decreased from 34.92 times in 1980 to 23.84 times in 1984. This change, considered alone, is a negative outcome. Return on equity, a measure also provided in the case, decreased from 22.27 percent in 1980 to 16.20 percent in 1984. Again, this change, considered on its own, is a negative outcome. Two additional comparative measures provided in the case, however, were more positive in character. Net income as a proportion of total assets increased slightly from 0.64 percent in 1980 to 0.68 percent in 1984, and net income per employee increased substantially from $16,910 in 1980 to $28,149 in 1984, a positive change of 66.46 percent. The improvement recorded in net income as a proportion of assets, however, was accomplished through increases in noninterest income (from 1.05 percent of total assets i

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1980   Interest income 87.44% 91.09% Noninterest income 12.56% 8.91%   Total income 100.00% 100.00% Interest expense 70.05% 73.10% Noninterest expense 17.07% 15.82% Provision for loan loss 4.76% 2.44% Income tax 1.80% 2.87% Net income 6.32% 5.77% D. The efficiency ratio (expenses/income) in 1984 was 87.11%, while that in 1980 was 88.92%. While a modest improvement was recorded over the period, performance remained unacceptable. 2. Balance sheet factors: a. Loans/total assets: 1984: 52.01%; 1980: 51.39%. Although this statistic was virtually unchanged, the small change recorded was positive in character. b. Loan loss reserve/loans: 1984: 1.55%; 1980: 1.09%. Taken on its face, this change is negative in character. As opposed to an indication of a riskie
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Approximate Word count = 1784
Approximate Pages = 7 (250 words per page)

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