Morgan Stanley (MS.N) said on Thursday revenue from commodities trading fell sharply in the first quarter and it is working to dispose of nonessential commodity businesses.
Revenue from trading commodities, currencies and bonds at the Wall Street bank fell more than 40 percent from a year earlier, a much greater decline than that experienced by Goldman Sachs Group Inc (GS.N) and JPMorgan Chase & Co (JPM.N), Morgan Stanley's main rivals in commodities.
Wall Street banks typically do not break out their commodities revenue, listing them instead under the fixed income category that includes currencies and bonds.
"Fixed Income & Commodities sales and trading net revenues were $1.5 billion, compared with $2.6 billion a year ago, reflecting declines in commodities and rates," Morgan Stanley said.
Goldman Sachs' first-quarter net revenue in this category fell 7 percent, while JPMorgan posted a drop of 5 percent.
Morgan Stanley said it was working to dispose of non-strategic commodity and fixed income businesses weighing on its asset base.
Chief Executive James Gorman hinted in October at a possible sale of Morgan Stanley's multibillion-dollar oil and metals trading arm, saying the bank had an obligation to explore "different structures" for those businesses because of new U.S. regulations limiting their activities.
Gorman's remarks came after months of chatter in banking circles that Morgan Stanley was in discussions with the oil-producing nation Qatar to sell at least a majority stake in its energy trading businesses.
"The program to reduce non-strategic risk-weighted assets in our Fixed Income and Commodities businesses remains on schedule," Morgan Stanley said in a statement accompanying its first-quarter earnings report.
The bank's commodities trading risk for the quarter - Value-at-Risk (VaR) - averaged $20 million per day, versus $22 million in the 2012 fourth quarter and $27 million in the 2012 first quarter.
Wall Street banks' average commodities VaR by quarter (millions of dollars per day):
(Reporting by Barani Krishnan; Editing by Gerald E. McCormick and John Wallace)