* Reports best ever Q3 in commodities trading
* Has repeatedly outshone U.S., European peers
* Cites good performances in precious metals, oil and gas
By Dmitry Zhdannikov
LONDON, Oct 25 (Reuters) - Deutsche Bank reported record-beating performance in commodities trading in the third quarter as it grabbed business from U.S. and European rival despite some of the sharpest falls in commodities prices since the 2008 financial crisis.
Deutsche has cemented a leading role among the biggest players in commodities in recent years, and bankers say it trails only Goldman Sachs and JP Morgan and is on par with Morgan Stanley and Barclays .
The German bank on Tuesday reported its best ever third quarter in commodities trading in July-September, which followed its best ever second quarter for April-June and its second-best quarter ever in the first quarter of 2011.
Deutsche Bank's stellar performance this year was in sharp contrast with most of its rivals, which reported weaker contributions and reduced risk exposure to commodities.
"Commodities delivered its best third-quarter revenues ever, driven by good performances in precious metals, oil and gas," Deutsche said in its third-quarter report, adding commodities also generated record nine-month revenues.
The head of Deutsche's commodities trading, David Silbert, told Reuters in an interview last month the bank expected further growth in its commodities business, including oil.
Commodity markets suffered some of their biggest drops in years during the third quarter as worries about the European debt crisis escalated and the dollar surged against the euro.
Signs that China may no longer be counted on to bump up demand for raw materials also sent many investors in the asset class scrambling for the exits.
Copper, for example, lost a third of its value in the third quarter and then rebounded by 17 percent since then.
The Reuters-Jefferies CRB index , a global benchmark for commodities, ended the quarter down 12 percent for its sharpest quarterly loss since the 2008 financial crisis.
Among the Wall Street heavyweights, Morgan Stanley generated higher revenue from commodities in the third quarter as it piled on more trading risks. Combined revenue from its fixed income, currencies and commodities division (FICC) rose to $3.9 billion from $2.1 billion in the second quarter and $847 million a year ago.
Goldman, which posted a third-quarter loss, said its commodities business generated more revenue than in the second quarter although it had to slash risks.
Bank of America Merrill Lynch posted a third-quarter profit but said its FICC division suffered from weaker client activity and adverse market conditions.
JP Morgan said its third-quarter profit fell, blaming declines in its FICC division.
Deutsche did not disclose revenues in commodities trading but said it helped offset an otherwise mixed performance in sales and trading. Its equities trading was affected by volatility, and credit trading experienced losses due to widening spreads, while foreign exchange trading brought in record third-quarter revenues due to significant exchange rate movements.
As a result, third-quarter net revenues from corporate banking and securities fell 38 percent year-on-year to 2.6 billion euros ($3.6 billion).
Deutsche also said its average value-at-risk -- a measure of how much money it could lose on an average day -- in all assets was 76.1 million euros in the first nine months of 2011, down from 95.6 million in 2010, of which VaR in commodities rose to 14.2 million euros from 12.7 million.
By comparison, Morgan Stanley's VaR for commodities averaged $32 million per day in the third quarter versus $29 million in the second quarter and $30 million in the third quarter of 2010.
Goldman reported a 36 percent tumble in its commodities VaR from the second quarter, while JP Morgan reported a 6 percent drop.
Also on Tuesday, Swiss bank UBS, whose commodities trading mainly focuses on precious metals, said it had positive contributions from its commodities business during the third quarter. It reported its VAR broadly unchanged at 4 million Swiss francs versus 3 million in the last quarter.