Bank revenues from securities trading soared nearly 28% in the first quarter to a record $2.38 billion, the Office of the Comptroller of the Currency said Tuesday.
"This really was a big quarter," said Michael L. Brosnan, the agency's director of treasury and market risk. "There was volatility in both interest rates and currencies, which generated business."
Eight large banks collected 86% of total trading revenues. Morgan Guaranty Trust Co. led the pack, earning $590 million. Citibank was a close second at $557 million. However, Morgan's $5.2 trillion portfolio of cash instruments and off-balance-sheet derivatives was more than twice the size of Citibank's, which was $2.5 trillion.
Chase Manhattan Bank's portfolio, $6.4 trillion, beat both Morgan and Citibank, but Chase's ranked third in trading revenues with $376 million.
Commercial banks earned $1.35 billion trading interest rate contracts in the first quarter, up $360 million from the fourth quarter. Revenues from foreign exchange positions dipped $77 million to $690 million. Revenue from other trading positions, including equities and commodities, increased 46% to $343 million.
Earnings from securities trading comprised 3% of gross revenues for all commercial banks and 8% for the top eight banks-the highest percentages since this data was first collected in 1995.
"The tendency is to focus on dollars, but the percent of gross revenues is much more telling," Mr. Brosnan said. "You see how important this is for these top banks. For some of them, it's a fifth of their revenues."
Trading accounted for 19.4% of Morgan's gross revenues in the first quarter, 13.7% of Bankers Trust New York's, and 8.9% of Citibank's.
The notional volume of derivatives jumped 9.5% in the quarter to $21.9 trillion, according to the Comptroller's Office. Credit derivatives, reported for the first time, stood at $19.1 billion, less than 0.1% of total notional volume. Morgan held $14.5 billion of the credit derivatives total.
The agency said the number of banks holding derivatives increased by 21 to 504 banks, reversing a five-quarter decline.
The book value of contracts past due 30 days or more aggregated only $32 million, or 0.01% of total credit exposure from derivatives. The Comptroller's Office attributed the low delinquency rate to the healthy economy, high credit quality of counterparties and end-users, and the increased use of collateral.