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Wednesday December 6 11:41 AM ET
Third Quarter Bank Trading Revenues Fall
WASHINGTON (Reuters) - Trading revenues at U.S. commercial banks fell
to $2.78 billion in the third quarter of 2000 from $3.03 billion in the second
quarter, the Office of the Comptroller of the Currency said on Wednesday.
The notional amount of derivatives in U.S. banks' portfolios -- a good
indication of market activity -- also fell to $38.31 trillion in the third quarter
from $39.33 trillion in the second quarter.
``Bank trading revenues for this quarter are consistent with the core
performance we have seen in recent periods,'' said Michael Brosnan, OCC
deputy comptroller for risk evaluation. ``The bumps along the way reflect
changes in individual bank strategies and/or market volatility.''
The decline in derivatives activity in the quarter was primarily due to a drop in
the use of short-term futures, options and forward contracts, he said,
attributing that to a reduction in capital market volatility over the period and
uncertainty over the effect of an upcoming accounting change.
Notwithstanding the decrease in revenues from the second quarter, the third quarter was still the fourth best
ever for U.S. banks' trading activities.
Banks earned $1.12 billion from their interest rate positions in the third quarter, up from $993 million in the
second quarter. Foreign exchange revenues fell to $1.11 billion from $1.34 billion, while equity positions earned
$471 million compared to $522 million in the prior quarter.
Commodity positions contributed $78 million in revenues versus $183 million in the second quarter.
The average credit exposure of the top seven U.S. trading banks, which account for 95 percent of the
derivatives in the banking system, fell to 239 percent of their combined risk-based capital, from 247 percent in
the prior quarter.
The banks' credit exposure from derivatives has been steadily falling since reaching a record high of 324
percent of total risk-based capital in the fourth quarter of 1998.
The total credit exposure of all U.S. commercial banks from derivatives fell $18 billion to $400 billion in the
third quarter. Banks charged off $1 million due to credit losses from derivatives, representing just 0.002 percent
of their total credit exposure, up from $794,000 in the second quarter. |
