Factbox - Wall St. and commodity risk: Morgan Stanley's VaR dips
(Reuters) - The quarterly earnings of Wall Street's biggest banks offer a glimpse into the scale of their commodity trading activity through a measure of trading risk called VaR.
On Thursday, Morgan Stanley reported its commodity Value-at-Risk (VaR) fell to $19 million in the second quarter from $20 million in the first quarter and $24 million in the second quarter of 2013.
VaR is the largest amount of money that the bank could lose on 95 percent of the trading days during the period.
The bank has scaled back its commodities operation by selling the bulk of its physical crude oil operations. In early July, it announced the close of the sale of its ownership interests in TransMontaigne Partners L.P. to NGL Energy Partners LP.
On Thursday, Chief Financial Officer Ruth Porat said in an interview that management does not believe that U.S. sanctions announced on Wednesday against Russian oil company Rosneft would affect a December deal for Rosneft to buy the majority of the bank's physical oil trading operations.
Morgan Stanley's revenue from fixed-income, currency and commodity trading fell 12.3 percent to $1 billion as a lack of volatility discouraged trading during the second quarter.
Typically, Wall Street banks group their commodities revenue under the fixed-income category and do not break out the sector, often leaving VaR as a key risk-reward indicator that can measure commodities exposure. The following is a table of VaR, in millions of dollars, for five major U.S. banks:
Q2 Q1 Q4 Q3 Q2 Q1
JPMorgan 9 11 15 13 13 15
Goldman Sachs 21 21 18 17 19 21
Morgan Stanley 19 20 18 20 24 20
BoA-ML 12* 12 14 15
Citigroup 14 11 13 12 34
*Denotes an average VaR over 2013
(Reporting by Anna Louie Sussman; Editing by Paul Simao and Jan Paschal)
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