WASHINGTON - Revenue from bank trading activities increased more than 60% during the second quarter, thanks mainly to earnings from derivatives.
Revenue from interest rate derivatives contracts more than tripled, increasing $678 million to $923 million, according to figures released Tuesday by the Office of the Comptroller of the Currency. Interest rate derivatives contracts account for 65% of the bank derivatives market.
For all bank trading, which also includes cash market instruments, revenues increased $634 million to $1.63 billion. Revenue from foreign exchange contracts, which account for 33% of the bank derivatives market, declined by $95 million to $520 million.
Aside from the revenue increases, the new numbers revealed little in the way of significant trends.
The amount of derivatives in commercial bank portfolios increased by $71 billion to $17.39 trillion - a rise of less than half a percent.
Chemical Bank leads the market in derivatives, holding contracts valued at $3.6 trillion. Chemical's proposed merger with Chase Manhattan would add another $1.5 trillion.
The number of banks holding derivatives dropped by 31 to 590, a decrease that OCC Senior Deputy Comptroller Doug Harris attributed to the banking industry's consolidation.
Reductions in interest rates and changes in currency exchange rates, as well as increased use of bilateral netting agreements, reduced exposure to 269% from 312% of capital for the nine banks most active in derivatives.