What is incredible in the loss they (banks) could have hire any Janitor from Moscow (when sober of course) to get a competent advice...
BankAmerica Has $220 Mln Trading Loss, Incurred Mostly in Russia
BankAmerica, J.P. Morgan Have Russian Trading Losses (Update6) (Rewrites with J.P. Morgan exposure.)
San Francisco, Aug. 28 (Bloomberg) -- BankAmerica Corp., the biggest bank on the West Coast, said it had $220 million of trading losses this quarter, mostly from Russia, as the biggest U.S. banks began reporting the damage from Russia's financial crisis.
J.P. Morgan & Co. said Russian trading losses left it with exposure there of $160 million, though it didn't specify how much it lost. BankBoston Corp. said it lost $10 million this quarter in Russia-related trading. Elsewhere, Deutsche Bank AG, Europe's second-largest bank, is setting aside money to cover losses in Russia, and Bank Austria AG said it increased provisions by $103 million for Russian losses.
Investors have lost more than $117 billion on Russian securities this year as the country's stock market crashed, its currency tumbled and it defaulted on its ruble debt.
Bankers Trust Corp. and other big U.S. banks ''are not going to have the kinds of losses that BankAmerica took, but that doesn't mean they didn't lose money in Russia,'' said Lawrence Cohn, a bank analyst at Ryan, Beck & Co.
BankAmerica shares fell 4 3/16 to 69 9/16 and J.P. Morgan fell 7 to 97 3/4, leading the Dow Jones Industrial Average down 114.31 to 8051.68. Standard & Poor's index of money-center banks fell 3.6 percent on concern that falling markets around the world will drag down bank profits.
Remaining Exposure
San Francisco-based BankAmerica said the losses reduced the company's total Russian exposure to about $100 million as of Aug. 26 from $412 million on June 30.
J.P. Morgan, the fourth-largest U.S. bank, said Russian losses helped cut its trading revenue to $300 million so far this quarter. A year ago, trading revenue for the entire quarter was $657 million. Its $160 million exposure to Russia, as of Aug. 27, includes loans in Russia and to funds that invest there.
BankBoston, the second-largest bank in New England, said its Russian trading position, now carried at 10 percent of its face value, is $6 million. Its stock fell 3 to 36. Yesterday, Republic New York Corp. said it took a $110 million charge in the third quarter for losses in Russian government bonds, valuing them at 15 cents on the dollar.
Concerns about U.S. bank investments in Russia sent bank stocks lower in the past week and helped shave billions of dollars from the market value of the companies.
J.P. Morgan shares fell 18 percent this week, cutting its market capitalization by $3.9 billion to $17 billion. BankAmerica fell 11 percent, losing $6.1 billion from its market cap, and BankBoston dropped 14 percent, shaving $1.7 billion from its market cap.
Affect On Earnings
At BankAmerica, which has among the largest foreign operations of any U.S. bank, the $220 million trading loss took a major bite from that line of business. Year-to-date trading- related income is about $315 million, the bank said.
The trading loss will reduce this quarter's earnings from operations by about 20 percent, according to calculations by David Winton, a bank analyst at Keefe, Bruyette & Woods Inc., who estimated that when taxes are taken into account, the $220 million will slash 26 cents from the diluted earnings per share.
The bank, which plans to merge later this year with NationsBank Corp. to form the biggest U.S. bank, was expected to earn $1.25 a share this quarter, according to a First Call Corp. survey of analysts. Total revenue should be healthy, though, as a one-time gain unrelated to Russia will offset the loss.
BankAmerica reported net income of $1.7 billion through the first six months of the year and had total assets of $264 billion on June 30.
BankAmerica Losses
Of the bank's $412 million in Russia exposure at the end of June, about $316 million was trading-related, mostly in securities, analysts said.
What's left are mostly short-term loans to Russian banks, Winton said, based on what bank officials told him. Most of the trading losses came from Russian bonds, he said. ''It's all been marked down,'' Winton said. ''The bank has very conservatively marked to market its positions in Russia, which should make future losses related to this small.''
Russia is restructuring its government debt as it grapples with a deepening financial crisis and foreign banks with exposure to Russian debt are expected to take losses as a result of the restructuring.
The bank would not elaborate on its announcement, which said the trading losses were the ''principal factor in reducing the company's Russia Federation exposure.''
The concern now is that Russia's troubles may be replicated in other emerging markets where BankAmerica's exposure is much larger than in eastern Europe, Winton said.
At the end of June, BankAmerica had $21 billion of Asian exposure and $11.3 billion of Latin American exposure, including $3.9 billion in Mexico, according to a company filing with the Securities and Exchange Commission.
J.P. Morgan
J.P. Morgan said trading revenue so far this quarter is about $300 million, dragged down in part by losses from trading in Russia. The company did not disclose the size of the Russia- related losses.
J.P. Morgan was hit not only by write-downs of Russian trading assets, but by lower revenue from trading in ''developed markets,'' a company statement said
Its Russian exposure of about $160 million on Aug. 27. is less than analysts' estimates, which put it at $300 million.
U.S. banks had total exposure to Russia as of the end of March of about $6.8 billion, according to data from the Federal Reserve.
Chase Manhattan Corp. the country's largest bank, had total exposure of about $500 million to Russia, while Bankers Trust had about $1 billion, said David Berry, a bank analyst at Keefe, Bruyette & Woods.
Today, Chase Manhattan Corp. fell 1 5/8 to 56 1/2 and Bankers Trust fell 4 7/16 to 79 3/8.
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