* Banks' commodity revenue increases to $3.3 bln in H1
* Driven by U.S. power and gas, more investor appetite
By Eric Onstad
LONDON, Aug 28 Commodities revenue at the top 10
investment banks climbed by about a fifth in the first half of
the year as a cold winter boosted business in U.S. power and gas
and some investors returned to the sector, a consultancy said.
Revenue from commodities for the leading banks rose 21
percent to $3.3 billion in the first six months after falling by
a similar percent last year, London-based financial industry
analytics firm Coalition said in a report on Thursday.
"Despite a sequential decline in 2Q, outperformance was
driven by strong revenues in U.S. power & gas on the back of the
cold winter, combined with a general improvement in investor
appetite," Coalition said.
Many investors had shunned commodities in recent years due
to lacklustre performance and as the sector was buffeted by
economic events, moving in step with other assets.
Commodities was the best-performing asset class in the first
half as the sector became more sensitive to supply-demand
fundamentals and less to economic factors, offering
diversification again for investor portfolios.
While some investors are returning to the sector, banks are
still departing from commodities trading, due partly to tougher
regulation and higher capital requirements after the global
In the first quarter, banks' commodities revenue rose by 26
percent, the first rise in first-quarter revenue since 2011.
The 19-commodity Thomson Reuters/Core Commodity CRB index
gained 10 percent in the first half after shedding 5
percent in the full year 2013.
Since end-June, the index has pared gains after some
commodities markets lost steam, including oil and grains,
weighed down by plentiful supplies. So far this year, the CRB is
up 3.8 percent.
Banks' commodities revenue has been steadily declining in
recent years as some institutions have slashed exposure and
others have shut commodities units.
Credit Suisse last month became the latest bank to
join the exodus, saying it was winding down commodities trading,
joining the likes of Deutsche Bank, JPMorgan
and Barclays in either exiting or significantly
downsizing their activities in commodities.
The top banks' commodities revenue came in at $4.5 billion
last year, less than a third of the $14.1 billion they racked up
in 2008 at the height of the commodities boom.
Coalition tracks the following banks: Bank of America
Merrill Lynch, Barclays, BNP Paribas,
Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs
, JPMorgan, Morgan Stanley and UBS.
(editing by Jane Baird)