UPDATE 1-Credit Suisse slashes commods trading risk in Q3
* Commodities VaR down 30 pct on quarter, 50 pct from year
* Risk level despite huge jump in commodities revenue
(Recasts and writes through with updated information on U.S. banks' commodities VaR)
LONDON, Oct 21 (Reuters) - Credit Suisse (CSGN.VX) (CS.N) cut its commodities trading risk by nearly 30 percent in the third quarter, following in the footsteps of some of its U.S. peers, while its commodity revenues jumped.
The Swiss bank's Value-at-Risk (VaR) for commodities slipped to $10 million during the quarter from $14 million in the second quarter. Year-on-year, it fell 50 percent from the $21 million in the third quarter of 2009.
Credit Suisse told Reuters it could not immediately explain the drop.
It saw a massive leap in trading revenues from commodity, emission and energy products. These businesses generated total sales of $169 million for Credit Suisse in the third quarter, up from $28 million in the second quarter and $92 million in the third quarter of 2009.
VaR is a global measure for the maximum amount of money a bank could potentially to lose in a day trading an asset class. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Table on commodities VaR at top US banks [ID:N19143719] Graphics on Goldman' historic VaR levels
Credit Suisse's VaR is based on a 99 percent confidence level of accuracy. U.S. banks usually use a 95 percent confidence level.
Most major Wall Street investment banks have pared their commodities risk this year as new financial regulations loom, although some like Morgan Stanley have raised their exposure to try and pry market share from competitors. [ID:nN20197806]
Since the financial crisis, an outcry for tougher government oversight of Wall Street has led to a raft of new financial regulations in the United States, culminating in the Volcker Rule passed in July. The rule bars banks from using more than 3 percent of their capital for trading on their account in partnerships and assets that include commodities.
Wall Street's biggest investment bank Goldman Sachs (GS.N) saw its commodities VaR fall to $29 million from $32 million in the second quarter, although the figure was up slightly from $27 million a year ago. [ID:nN19119620]
Morgan Stanley's commodities risk overshot that of Goldman's for the first time in nearly three years during the quarter, averaging $32 million, or 17 percent higher from the second quarter and 30 percent up from a year ago. [ID:nN20235356]
Credit Suisse's total trading revenues fell to $943 million in the third quarter, from $3.6 billion in the second quarter.
It reported a 74 percent drop in third-quarter net profit, falling short of forecasts as sluggish equities trading cut further into investment banking profits. [ID:nLDE69K03R].
(Reporting by Dmitry Zhdannikov in London and Barani Krishnan in New York; Editing by Cynthia Osterman)
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