WASHINGTON Commercial banks income from derivatives contracts dropped by about 2%, to $2.7 billion, in the fourth quarter, the Office of the Comptroller of the Currency reported on Friday.
The majority of contracts, 81%, were interest-rate contracts, said Michael L. Brosnan, the agencys deputy comptroller for risk evaluation.
The notional amount of derivatives in insured commercial bank portfolios increased by $2.2 trillion in the fourth quarter of 2000, to a record high of $40.5 trillion.
The notional, or total, amount of interest rate contracts increased the most, by $2.1 trillion, to $32.9 trillion.
The sudden decline in interest rates during the fourth quarter was a key contributor to the sharp growth in derivatives contracts, Mr. Brosnan said. In such environments, customers of dealer banks are more inclined to use derivatives contracts as they manage their financial positions particularly in reducing their firms risk to uncertain markets.
Foreign exchange contracts rose $66 billion, to $6.1 trillion, or 15% of overall contracts.
The top seven banks accounted for 83% of total trading revenue, up 1% from the third quarter.
Citibank was the top earner, making $813 million from a notional base of $5 trillion. Morgan Guaranty Trust Co. came in second, with earnings of $608 million from a $9 trillion base.
