U.S. commercial banks reported a drop in trading revenues for the second quarter as earnings from interest products plunged, though revenues were boosted by improving credit markets, the Office of the Comptroller of the Currency said on Friday.

Banks reported $5.2 billion in cash and derivatives trading revenues for the second quarter, their sixth highest revenue generating quarter, though down from the record $9.8 billion earned in the first quarter of the year, the OCC said.

Revenues were boosted as banks wrote down fewer losses from bad loans and benefited from wide, though declining, bid/offer spreads, the OCC said. A rally in credit spreads in the quarter was also positive for banks' trading books, it said.

Revenues from interest rate products dropped dramatically to $1.1 billion in the second quarter, after earning banks a record $9 billion in the previous quarter, the OCC said.

Interest rate products make up the bulk of overall derivatives exposures, accounting for 85 percent of total volumes in the contracts, the OCC said.

Earnings from credit products, meanwhile, swung to $1.9 billion, after posting a loss of $3.2 billion in the first quarter.

Foreign exchange revenue, meanwhile, fell to $2.1 billion from $2.4 billion in the first quarter, while equity trading posted a loss of $279 million, compared to a $1.05 billion gain in the first quarter, the OCC said.

The OCC also reported that net current credit exposure, which is the amount banks risk losing upon the possible collapse of counterparties on their derivatives trades, decreased 20 percent during the quarter to $555 billion.


Derivative exposures remained highly concentrated, with the largest five banks accounting for 97 percent of exposures, the OCC said.

JPMorgan , Goldman Sachs , Bank of America , Citibank and Wells Fargo , have the largest derivatives exposures of U.S. commercial banks.

As of June 30, their notional derivative exposures stood at $79.94 trillion, $40.48 trillion, $39.06 trillion, $31.94 trillion and $5.11 trillion, respectively.

Of these banks Goldman got the largest overall boost from its trading revenue, which represented 63 percent of the bank's gross revenue in the quarter, the OCC said.

Trading revenue for JPMorgan represented 9 percent of its gross revenue and caused a loss of 1 percent and 2 percent, respectively, to Bank of America and Citibank's gross revenues. Wells Fargo's gross revenue gained 2 percent from trading.

JPMorgan, Bank of America, Goldman Sachs, Morgan Stanley and Citigroup had the largest derivative exposures of all holding companies, at $79.86 trillion, $75.36 trillion, $47.78 trillion, $40.6 trillion and $34.18 trillion, respectively.

The OCC said that bank supervisors continue to encourage banks to increase the volume of derivative contracts cleared by central counterparties because of the high exposures.

(Reporting by Karen Brettell in New York and Karey Wutkowski in Washington; Editing by Theodore d'Afflisio)