* Goldman commodity revenue down 90 pct since 2009
* JPMorgan commodity revenue down 16 percent in 2012
* MS commodity revenue down 20 percent last year
By David Sheppard
NEW YORK, March 11 Commodity revenues at leading
Wall Street firms crashed last year to their lowest on record,
as tighter regulation and limited price swings squeezed the once
dominant traders of Goldman Sachs Group Inc, JPMorgan
Chase & Co and Morgan Stanley.
All three firms reported double-digit percentage declines in
revenues for oil, grains and copper trading in 2012,
illustrating how the one-time 'Wall Street Refiners' have
withered in the face of subdued markets and restrictions on
The decline is most stark at Goldman, where commodity
revenues collapsed by more than 60 percent year-on-year in 2012
to just $575 million, according to the bank's annual report.
Long considered the top commodity bank on Wall Street for
its expertise in both physical and financial markets, Goldman's
revenues have now fallen by almost 90 percent since 2009 when
they totaled more than $4.5 billion.
Morgan Stanley, Goldman's fellow Wall Street pioneer in
commodity markets three decades ago, reported a 20 percent
decline in commodity revenues in 2012.
JPMorgan, which has grown its commodity business through a
series of bold acquisitions since the 2008 financial crisis and
now surpasses both Goldman and Morgan Stanley, saw revenues
decline 16 percent to $2.4 billion.
Spokespeople for the banks, who have regularly declined to
discuss their commodity results since they began revealing them
in filings in 2009, were not immediately available to comment.
In total, Wall Street's commodity revenues have fallen more
than 50 percent since 2008 to just $6 billion, according to a
survey by London-based research firm Coalition.
Last year commodities made up just 6.5 percent of revenues
from trading fixed income, currencies and commodities (FICC),
Coalition said, down from 10.5 percent last year and 30 percent
"Ongoing concerns about increased regulation and capital
sensitivity (are) pushing banks to re-evaluate their commodities
strategies," Coalition said in a report.
The latest results pose questions about how the banks' may
adapt in the commodities sector, which was estimated to be worth
as much as $14 billion to Wall Street annually at its peak.
Following Goldman and Morgan Stanley's lead, the boom in
resource markets that started 10 years ago attracted many big
banks to trade oil, metals and agricultural products, but many
have struggled since the financial crisis.
The Volcker rule has placed restrictions on trading
positions held purely for the banks' own profits as part of the
Dodd-Frank Act. Lower market volatility has also cut into
clients' trading and hedging activities.
While Brent crude oil averaged a record $112 a barrel in
2012, that was just $1 more than the average price in the
Wall Street's continued ownership of physical commodity
assets, including power plants, oil storage tanks and metals
warehouses, is also still under question after the conversion of
Goldman and Morgan Stanley to Bank Holding Companies during the
Late last year, Morgan Stanley held discussions about
selling part of its commodities business to the Qatari sovereign
wealth fund, though that deal appears to be on hold.
Based on Reuters' calculations, revenues at Morgan Stanley's
commodity business peaked at around $3 billion in 2008, but have
since declined to just over $1 billion last year.
In October, Goldman Sachs denied it had ever "seriously"
looked at splitting off its commodities business, after reports
said it had held "preliminary internal discussions" about a
At JPMorgan, which is a relatively late entrant to
large-scale commodity trading following its acquisition of RBS
Sempra's metals and energy trading desks in 2010, the 16 percent
decline may create concern rather than panic.
Global commodity chief Blythe Masters has largely succeeded
in her goal of surpassing Goldman and Morgan Stanley as the
largest bank in commodities, though industry experts say
JPMorgan may now start to focus more on costs to boost
The bank said last year it has 600 professionals in its
commodity division, and 10 offices globally.