Biggest Banks’ Commodity Revenues to Slump 14% This Year

The world’s 10 largest investment banks including Goldman Sachs Group Inc. and Morgan Stanley will receive 14 percent less revenue from commodities this year, according to data from Coalition, an analytics company.

Revenue will drop to $4.7 billion from $5.5 billion in 2012, London-based Coalition said in a report today. It slumped 18 percent to $4 billion in the first nine months from the same period last year. The Standard & Poor’s GSCI Index of 24 commodities is heading for the first annual drop since 2008.

Banks including JPMorgan Chase & Co., the biggest U.S. lender by assets, are considering withdrawing from some raw-materials trading and U.S. lawmakers are questioning if they should be allowed to own physical commodities businesses. Commodity assets under management declined to $343 billion at the end of the third quarter, from $418 billion in December, according to Barclays Plc.

“Poor performance in investor products and power and gas continued into the third quarter,” Coalition said. “Oil revenues were in line with the first half and metals remained stable. Inventory financing activities were more robust.”

The 10 banks’ revenue in fixed income, currencies and commodities fell 19 percent to $60 billion in the first nine months and will decline by 20 percent in the full year, the report said.

JPMorgan generated the most first-half revenue from commodities among the 10 banks, followed by Goldman Sachs and Morgan Stanley, Coalition said in September. Spokespeople for JPMorgan, Goldman Sachs and Morgan Stanley declined to comment.

Commodity Exits

JPMorgan said in July that it was exploring strategic alternatives for its commodity owning and trading business. The unit produces $750 million in annual income before compensation costs, according to a person with knowledge of the sale process. Morgan Stanley held talks last year with Qatar’s sovereign-wealth fund on selling a stake in its raw-materials division.

Some smaller banks are expanding in commodities. ABN Amro Group NV said last month it plans to build a metals-brokerage business in London and Singapore in 2014. Russia’s VTB Capital said it may expand into industrial-metals trading in 2014 and Brazil’s Grupo BTG Pactual entered commodities this year.

Coalition is a unit of Mumbai-based CRISIL Ltd., whose main stockholder is Standard & Poor’s, part of McGraw Hill Financial Inc., Coalition’s website shows.

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