* Commodities make up 24 pct drop in fixed income in 2012
* Drop due to low volatility, shrinking client activity
Feb 14 Revenue from commodities trading at
global investment banks fell by a quarter last year from 2011,
making the asset class the worst performer in the fixed-income
business of banks, an industry survey showed on Thursday.
Low market volatility and shrinking client activity were
reasons for the drop, and the effect was particularly evident in
energy and precious metals businesses, according to the survey
by the London-based Coalition, a financial services analytics
"Performance was also subdued by ongoing concerns about
increased regulation and capital sensitivity, pushing banks to
re-evaluate their commodities strategies," an executive summary
of the Coalition Index said.
"Energy, investor products and precious metals options
businesses were notably affected," according to the survey,
which covered a total of 10 top banks on Wall Street and in
The banks covered in the report were Goldman Sachs,
JPMorgan, Bank of America, Citigroup,
Barclays, Credit Suisse, Deutsche Bank
, Morgan Stanley, RBS and UBS
Commodities as a fixed-income component saw a revenue of
about $6 billion in 2012 versus $8 billion the previous year,
the survey showed.
That put commodities at the bottom heap of the fixed income
category, despite revenue for the category growing as a whole to
$92 billion in 2012 from $76 billion in 2011.
Commodity prices, measured by key sector indices, fell for a
second straight year in 2012, hurt mainly by Europe's protracted
debt woes and also by some worries about the U.S. fiscal crisis.
The Thomson Reuters-Jefferies CRB index, which tracks
19 commodities in all, fell more than 3 percent on the year
after an 8 percent drop in 2011.
Wall Street investment banks typically do not break down
their commodity revenue, preferring to cite them as part of the
broader fixed income, currency and commodity category.
In the fourth quarter of 2012, banks such as Goldman Sachs
and Morgan Stanley singled out commodities for being a drag on
their FICC business. Morgan Stanley particularly said its fourth
quarter commodities results were the worst since 1995.
The CRB index for commodities fell 5 percent in that
quarter. Investor fears about an U.S. "fiscal cliff" and another
possible recession in 2013 had also kept markets on tenterhooks
through most of December.