OCC’s Quarterly Report on Bank Trading and Derivatives Activities

Bank trading results rebounded sharply in the first quarter, consistent with the historical trend for strong first
quarter revenues. Banks reported a record $9.8 billion in first quarter trading revenues, compared to a loss of
$9.2 billion in the fourth quarter of 2008. Bank trading results benefited from solid core financial intermediation
business flows, with continued wide bid/offer spreads, as well as fewer write-downs on legacy credit assets. As
noted in previous quarterly reports, another factor that drove revenues was the recognition of changes in the
value of trading liabilities. When bank credit spreads increase, as they did in the first quarter, banks reflect the
declining value of their liabilities as trading revenues. While trading performance was strong even without the
liability value changes, this source did add materially to first quarter trading performance.
Revenues from interest rate contracts were a record $9.1 billion, a $12.5 billion advance from a $3.4 billion loss
in the fourth quarter. Revenues from foreign exchange contracts fell 40% from the record fourth quarter to
$2.4 billion, while revenue from equity contracts rose $2.3 billion to $1.0 billion. Credit trading improved
sharply but remains under pressure, as banks recorded $3.2 billion in losses in the first quarter, compared to a
$9.0 billion fourth quarter loss.