JPMorgan Chase & Co. (JPM), which said last month it plans to get out of the business of owning and trading physical commodities from metals to oil, bought the over-the-counter commodity derivatives portfolio of UBS AG (UBSN), which is exiting most of its raw-materials trading.
The transaction includes on-exchange hedge positions and excludes precious metals and index-based products, UBS said in an e-mailed statement today. JPMorgan assumed market risk on the portfolio and the two banks “will work together in the coming months with their clients to fully assign contracts for individual trades to JPMorgan,” according to the statement. JPMorgan spokesman Patrick Burton declined to comment.
Banks are scaling back or exiting their commodities operations amid regulatory scrutiny and lower profits from raw materials. Revenue in commodities at the 10 largest investment banks fell 25 percent in the first half of the year, analytics company Coalition said today.
JPMorgan said last month that it’s considering an exit from the business of trading physical commodities, marking a reversal of its push into raw materials with its 2010 purchase of parts of RBS Sempra, a joint venture between Royal Bank of Scotland Group Plc and Sempra Energy. (SRE) UBS and JPMorgan didn't report the price of the transaction reported today.
Zurich-based UBS, Switzerland’s biggest lender, last year decided to close its oil, base metals and agriculture trading desks, a person with direct knowledge of the decision said Oct. 31. The bank is keeping its index-investor products and precious metals trading.
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