US commercial banks reported an 11 percent rise in trading revenues for the third quarter, boosted by strong trading flows and a wide, though declining, spread between the level they buy and sell positions, the Office of the Comptroller of the Currency said on Friday.
Banks reported trading revenues $5.5 billion for the third quarter, their fourth highest revenue generating quarter, up from $5.2 billion in the second quarter, the OCC said. Banks had generated a record $9.8 billion of trading revenues in the first quarter of the year.
"The return to more normal financial market conditions has allowed banks to generate more consistent trading revenues this year," Kathryn Dick, deputy comptroller for credit and market risk at the OCC, said. Interest rate products generated the strongest revenues, rising to $5.45 billion from $1.1 billion in the second quarter. Interest rate derivatives also comprised 84 percent of total derivatives volumes, which stood at $204.3 trillion.
Derivative exposures remained highly concentrated, with the largest five banks accounting for 97 percent of overall exposures, and 88 percent of net credit exposure, the OCC said. Net current credit exposure, which is the amount banks risk losing upon the possible collapse of counterparties on their derivatives trades, declined 13 percent during the quarter to $484 billion.
J.P. Morgan, Goldman Sachs, Bank of America, Citibank and Wells Fargo, have the largest derivatives exposures of US commercial banks. As of September 30, their notional derivative exposures stood at $78.97 trillion, $41.97 trillion, $40.1 trillion, $31.97 trillion and $4.47 trillion, respectively. J.P. Morgan, Bank of America, Goldman Sachs, Morgan Stanley and Citigroup had the largest derivative exposures of all holding companies, at $73.40 trillion, $75.03 trillion, $49.83 trillion, $41.83 trillion and $34.147 trillion, respectively.