Banks’ trading revenue down 19.8% from Q1; net current credit exposure up 10.6%

Commercial banks and federal savings associations had trading revenue totaling $8 billion during the second quarter of 2019, which was down $2 billion, or 19.8%, from first-quarter trading revenue, according to the Office of the Comptroller of the Currency (OCC).

Year over year, second-quarter trading revenue was up 9%, the OCC said in its report, released Tuesday. Second-quarter 2018 trading revenue was $7.4 billion, the agency said.

Consolidated holding company trading revenue totaled $18.4 billion in the second quarter, down $6.5 billion, or 26.1%, from the first quarter. Year over year, holding company trading revenue increased by $3.5 billion, or 23.6%.

The quarter-over-quarter decrease in trading revenue, for banks as well as holding companies, was driven by decreases across all derivative categories, according to the report.

The report also shows that credit exposure from banks derivatives activities increased from the first to second quarter of this year, with net current credit exposure (NCCE) rising $35.4 billion, or 10.6%, to a total of $371 billion.

The report also shows:

  • Four large banks held 87.8% of the total banking industry notional amount of derivatives and 83.8% of industry NCCE. A a total of 1,340 insured U.S. commercial banks and savings associations held derivatives at the end of the second quarter 2019.
  • Derivative contracts remained concentrated in interest rate products, which represented 74.1% of total derivative notional amounts.
  • Derivative notional amounts increased in the second quarter of 2019 by $3.6 trillion, or 1.8%, to $204.9 trillion.
  • The percentage of centrally cleared derivatives transactions increased quarter-over-quarter to 42.5% in the second quarter 2019.

OCC’s Quarterly Report on Bank Trading and Derivatives Activities: Second Quarter 2019