More Firms Attribute Losses to Troubled Russian Markets

Citicorp; Morgan Stanley, Dean Witter, Discover & Co.; and Bankers Trust Corp. on Tuesday joined a growing list of financial institutions announcing that plunging Russian markets saddled them with losses in trading and other businesses.

Citicorp, the second-largest U.S. bank, said losses related to Russia will cut third-quarter earnings by $200 million.

The money center bank said two-thirds of its losses came directly from loans and investments in Russia, while the remaining third came mostly from loans to hedge funds that invest in Russia.

“Any continued weakness in the global securities markets will affect the contributions to earnings of venture capital and other portfolios as well,” Citicorp said.

Morgan Stanley, the biggest U.S. securities firm, said trading losses from Russia would cut fiscal third-quarter profit by $110 million.

Morgan Stanley attributed its losses to “difficult conditions in global credit markets” and said it had a loss linked to a leveraged portfolio. It said the firm is performing “extremely well” and gave no other details about the losses.

“The financial sector is in much worse shape than people think,” said Edgar Peters, chief investment strategist at PanAgora Asset Management Inc. in Boston, who oversees $17 billion in investments. “We don’t really know the extent of the damage.”

Credit Suisse Group, Salomon Smith Barney Inc. and BankAmerica Corp. are among the financial companies that have announced losses tied to Russia’s default and currency devaluation in recent weeks. J.P. Morgan & Co. also said it lost money because of Russia but declined to say how much.

Bankers Trust, the seventh-largest U.S. bank, said it lost $350 million before taxes from trading as it wrote down the value of its Russian securities to 15 cents on the dollar.

Bankers Trust hasn’t reported a loss since the first quarter of 1995, when it was battered by derivatives losses and Mexico’s peso devaluation.

The current losses came from declines in Russian securities, a $10-million charge for loans related to Russia that the bank doesn’t expect to be repaid, slumping markets in the U.S. and a slowdown in investment banking revenue.

Bankers Trust stock fell $1.19, or 1.6%, to $73.13 on the New York Stock Exchange.

Before their announcements, Morgan Stanley fell 44 cents to $57.63, and Citicorp fell $1.69 to $106.63 on the NYSE.