Some Big Winners Among U.S. Banks In 1991 Citi, BofA, BNY Report Record Forex Gains

With almost all the votes counted, it appears that 1991 didn't turn out to be such a bad year in the foreign exchange market after all. On average, U.S. banks managed to rake in about the same amount of money they did last year, and some did much better. Citibank posted its most impressive returns to date in the fourth quarter and for the year. Bank of America and Bank of New York also reported record foreign exchange trading revenues in 1991.

But Citi's performance alone couldn't quite lift average fourth quarter or 1991 foreign exchange trading gains above those reported a year ago. On average, U.S. banks earned about $34.7 million during the quarter, just shy of the $36.4 million reported in 1990. For the year, despite several record performances, foreign exchange trading gains were also down. On average, U.S. reported revenues of about $136.8 million in 1991, compared with $138.9 million in 1990.

Although several banks, including Bankers Trust, still hadn't reported fourth quarter earnings by press time, the tone appears to have been set. In fact, Bankers may even dampen the picture further, for the nine months ended September 30, Bankers Trust reported that foreign exchange trading revenues were down 34 percent from 1990 levels.

But overall, despite all the grumbling about liquidity and credit concerns, U.S. banks posted generally respectable returns, particularly in the cost-cutting environment that prevailed during the period.

Citibank reported record foreign exchange trading revenues of $222 million in the fourth quarter and $709 million for the year. Citi's forex performance was bolstered by
two factors, sources close to the bank say, tremendous volatility, particularly in the first few months of the year and in December, and its role as one of the prime market makers in the world.

Despite its enviable foreign exchange trading revenue, Citibank's overall performance was dismal. Citi posted a net loss of $457 million for the year. The bank continues
to struggle under the weight of bad loans and chairman John Reed doesn't expect that to change anytime soon. Quotron System Inc. is also contributing to the red ink, the bank wrote down over $400 million on its investment last year.

That minor flaw aside, industry observers are now wondering whether the new Chemical Bank can overthrow the reigning king given its dominant position. But even those that say it has a chance don't expect it to happen overnight. In the meantime, Citi is expected to go on posting returns that are more than double those of its closest competitors.

Among those, Bank of America, despite a dismal third quarter, was the only bank that managed to better its 1990 performance. Bank of America also outpaced the dismal performance of its merger partner Security Pacific, which posted skimpier gains in the fourth quarter and for the year.

The only other performance of note in 1991 was that of Bank of New York, which posted gains of $71 million for the year, a 48 percent increase from its lackluster performance in 1990. Although its fourth quarter forex results were in line with those reported last year, officials there were able to ride out the Persian Gulf war far better than most and managed to post solid gains in the third quarter as a result.