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Banks' commodity revenue down by a fifth through Q3
November 16, 2012 / 2:03 PM / 5 years ago

Banks' commodity revenue down by a fifth through Q3

* Hit by lower volatility, weak prices

* Also some banks left commodity sector

* Pressured by financial crisis, regulation

LONDON, Nov 16 (Reuters) - Investment bank revenue from commodities trading slid by a fifth during the first nine months of the year due to lower volatility and weak prices, financial sector consultant Coalition said.

Turnover was also hit as some banks exited from the sector, Coalition added in a report on overall investment bank performance so far this year.

Investment banks are being squeezed in the commodities sector, hit by the global financial crisis and tighter regulation.

Commodity revenue from the top 10 investment banks fell to $5.18 billion in the first nine months of the year from $6.4 billion in the same period in 2011, Coalition said.

“There were double digit revenue declines in commodities... due to reduced volatility and generally lower underlying commodity prices,” the report said, adding the figures were also depressed due to outperformance in the first half of last year.

It said turnover in the third quarter declined to $1.54 billion from $1.92 billion last year, down 20 percent.

“With the exception of metals, performance was weak across all products. For several... banks, there were strategic exits of the business line due to regulatory and/or capital pressures.”

Coalition did not identify the banks which have closed down commodity units, but both UBS and RBS have reduced exposure to the sector this year.

The other eight banks that Coalition tracks are Bank of America/Merrill Lynch, Barclays, Citigroup , Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan and Morgan Stanley .

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