U.S. bank trading revenue fell sharply in the fourth quarter of 2025, declining 16.3 percent from the prior quarter as weaker results in interest rate and equity trading offset gains in foreign exchange, according to the Office of the Comptroller of the Currency (OCC).
In the latest Quarterly Report on Bank Trading and Derivatives Activities, the OCC noted that insured U.S. commercial banks and savings associations generated $14.9 billion in trading revenue, down $2.9 billion from the third quarter and $680 million, or 4.4 percent, from a year earlier.
The quarter-over-quarter decline was driven primarily by interest rate and equity trading. Interest rate revenue fell $1.7 billion, or 45.6 percent, to $2.0 billion, while equity trading declined $2.3 billion, or 32.7 percent, to $4.7 billion. Credit trading revenue dropped $91 million, or 73.7 percent, to $32 million. Foreign exchange was the only category to post an increase, rising $1.2 billion, or 22.5 percent, to $6.4 billion. Revenue from commodities and other instruments was little changed at $1.7 billion.
At the consolidated bank holding company level, which includes trading activity in non-bank subsidiaries, revenue totaled $24.7 billion in the fourth quarter, down $10.2 billion, or 29.2 percent, from the prior quarter, but up $4.5 billion, or 22.8 percent, from the same period in 2024, according to the OCC.
Banks accounted for 60.2 percent of total holding company trading revenue in the fourth quarter, up from 50.9 percent in the third quarter. The OCC noted that prior to the 2008 financial crisis, banks typically generated between 60 and 80 percent of holding company trading revenue, compared with a median of 45 percent over the past 17 years.
Total derivative notional amounts held by insured U.S. commercial banks and savings associations decreased $23.8 trillion, or 10.3 percent, to $208.1 trillion in the fourth quarter, with declines across interest rate, foreign exchange, equity, and credit instruments.
Interest rate contracts remained the largest category at $135.8 trillion, representing 65.3 percent of total notional amounts, followed by foreign exchange contracts at $57.3 trillion, or 27.5 percent. Equity contracts totaled $8.0 trillion, credit derivatives $5.0 trillion, and commodity and other contracts $2.0 trillion. By contract type, swaps accounted for $125.0 trillion, or 60.1 percent of total notional amounts, followed by futures and forwards at $37.7 trillion, options at $40.4 trillion, and credit derivatives at $5.0 trillion.
Four banks – Goldman Sachs Bank USA, Citibank NA, JPMorgan Chase Bank NA, and Bank of America NA – held 85.1 percent of total industry notional amounts. The largest 25 banks accounted for nearly all derivative contracts.
Net current credit exposure (NCCE) decreased $10.7 billion, or 4.2 percent, to $241.0 billion in the fourth quarter. Legally enforceable netting agreements reduced gross positive fair value exposures by 89.1 percent, or $2.0 trillion. Gross positive fair value rose $41 billion to $2.2 trillion, while gross negative fair value increased $53 billion to $2.1 trillion.
By counterparty type, 58.0 percent of NCCE was to corporations and other counterparties, 35.8 percent to banks and securities firms, 4.3 percent to sovereign governments, and 2.0 percent to hedge funds.
Banks held collateral equal to 147.8 percent of total NCCE at quarter-end, up from 142.5 percent in the prior quarter. Of that collateral, 66.3 percent was held in cash and U.S. government securities.
Average 60-day Value-at-Risk declined at the four largest trading banks. VaR was $218 million at Goldman Sachs Bank USA, $168 million at Citibank NA, $159 million at JPMorgan Chase Bank NA, and $78 million at Bank of America NA.
Level 3 trading assets totaled $35.4 billion at the end of the fourth quarter, down 0.3 percent from the prior quarter and up 4.1 percent year over year, and significantly below the $204.0 billion peak recorded in 2008.
Credit derivative notional amounts declined $774 billion, or 13.3 percent, to $5.0 trillion. Credit default swaps accounted for $4.1 trillion, or 80.8 percent of the total. Investment-grade contracts represented 79.2 percent of the market, with $2.7 trillion in contracts maturing between one and five years.
Among reporting banks, those net selling credit protection held $2.4 trillion in notional amounts, while those net purchasing credit protection held $2.7 trillion, both down from the prior quarter.
Centrally cleared derivatives accounted for 32.6 percent of total notional amounts in the fourth quarter, down from 37.2 percent in the third quarter. Interest rate derivatives were 44.9 percent centrally cleared, compared with 4.0 percent for foreign exchange, 26.7 percent for equity contracts, and 24.9 percent for credit derivatives.
