Downturn may reshuffle top banks in energy

By Jane Merriman - Analysis

LONDON (Reuters) - The global credit crisis could reshuffle the rankings of banks in energy and commodity markets, with J.P. Morgan and Barclays tipped to take market share from rivals.

Some players have already folded their hands.

Lehman Brothers filed for bankruptcy and Swiss bank UBS is closing its commodities business.

Others banks may pull out or scale back as they are forced to reduce risk and rebuild capital.

"The removal of actual or potential competitors and increased opportunity to hire people more cheaply creates a market share opportunity," said Ian Gordon, analyst at Exane BNP Paribas.

"What we've seen at Barclays is a very significant growth position in energy and commodities," he said. "They are well-placed to take market share due to others disappearing or having less capital to commit to that area."

Barclays, which has been building its business for a decade, has bought the North American investment banking and capital markets business of Lehman Brothers, which included commodities.

The UK bank has benefited as a well-established player.

"We are firmly in the top tier of this market," said Benoit de Vitry, Barclays head of commodities, emerging markets and head of global markets - trading, Europe. "Our funding costs are cheaper than for some of our competitors."

J.P. Morgan Chase & Co is pressing ahead with growth plans.

"We've benefited from a flight to quality and are seeing market share gains," Blythe Masters, head of the firm's global commodities business told Reuters.

A lot of banks jumped on the commodities bandwagon during a 6-year price boom, which led to a surge in oil to $147 a barrel this year and record prices for some base metals and gold.

Banks sought to capitalize on proprietary trading opportunities, increased demand from corporate clients to hedge volatile prices and from investors attracted to commodities for portfolio diversification.

CAPITAL CRUNCH

But the credit crisis has changed all this.