* Sector sees increase after years of declines
* Boosted by U.S. power & gas, investor products
By Eric Onstad
LONDON, May 19 Commodities revenue at the top 10
investment banks climbed 26 percent in the first quarter after
years of declines, due to higher U.S. power and gas turnover as
well as stronger investor interest, a consultancy said on
Revenue from commodities for top banks in the first quarter
rose to $1.8 billion from $1.4 billion in the same period last
year, London-based financial industry analytics firm Coalition
said in a report.
"The cold winter in North America created volatility and had
a positive impact on U.S. power and gas revenues," it said.
"Additionally, investor product performance recovered from a
very low base as client activity levels showed some
Commodities have been the best performing asset class so far
this year and investors have warmed to the sector to provide
diversification in portfolios as it becomes more sensitive to
supply-demand fundamentals and less to macro-economic factors.
The 19-commodity Thomson Reuters/Core Commodity CRB index
is up 9.4 percent this year after shedding 5 percent
Wall Street investment banks typically do not break down
their commodity revenue, preferring to cite it as part of the
broader fixed income, currency and commodities category (FICC).
Commodities was the only sub-sector showing an increase
within FICC, but it was not enough to keep FICC revenues from
falling 16 percent to $22 billion, Coalition said.
Banks' commodities revenue had been steadily declining in
recent years as some institutions slashed exposure and others
completely shut down commodities units, hit by tougher
regulation and higher capital requirements after the global
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.
British bank Barclays was the latest institution to
join the exodus last month when it said it planned to quit most
of its commodities trading businesses.
JPMorgan Chase has sold its physical commodities
unit, and Deutsche Bank last year largely exited
Coalition tracks the following banks: Bank of America
Merrill Lynch, Barclays, BNP Paribas,
Citigroup, Credit Suisse, Deutsche Bank, Goldman
Sachs, JPMorgan Chase, Morgan Stanley and UBS
(Reporting by Eric Onstad, editing by David Evans)