Securities Trading Revenue Dropped 52% in Quarter; OCC Cites Asian Turmoil
Rehm, Barbara A., American Banker
Stung by the recession in Southeast Asia, bank revenue from securities trading plunged 52%, to $1.2 billion, in the fourth quarter, the Office of the Comptroller of the Currency announced Wednesday.
The drop from the third quarter was primarily "a result of volatility, notably in the Asian markets," said Michael L. Brosnan, OCC's director of treasury and market risk. "It was a poor quarter no matter how you look at it."
Although credit losses on derivatives remain low-just $61.2 million in the quarter and $125 million for the year-banks are losing more money in this business than ever before. In 1996, bank losses attributed to derivatives totaled $37 million.
"The losses, although small, are growing, and that reflects a maturing business," Mr. Brosnan said in an interview. "We are likely to see more and more losses going forward."
The number of commercial banks that hold derivatives decreased by 16, to 459. Eight large banks hold 95% of the total notional amount of derivatives in the banking system.
None of these eight banks increased trading revenues during the fourth quarter, and three even lost money: First Chicago NBD Corp., Bankers Trust New York Corp., and Chase Manhattan Corp. …