Goldman Sachs Group Inc (GS.N) Chief Executive Lloyd Blankfein made his most public commitment to the bank's commodity trading business on Wednesday, even as regulators consider measures that may push Wall Street out of physical markets.
While rival JPMorgan Chase & Co (JPM.N) decided in July to quit trading in the physical raw material markets and Morgan Stanley (MS.N) has publicly weighed spinning off all or part of its vast franchise, Goldman has remained steadfast.
"That is a core, strategic business for us," Blankfein told cable television network CNBC. He said Goldman's customers would be worse off if the company left the commodities markets. The comments echoed those made by Chief Operating Officer Gary Cohn in early August.
Diminished profit margins in commodities and a crackdown on trading activities by other regulators had convinced JPMorgan its physical commodities business was more trouble than it was worth.
The U.S. Federal Reserve is expected to make a decision within weeks about whether Goldman and Morgan Stanley, formerly unregulated investment banks, should be allowed to continue trading physical commodities broadly, and investing in infrastructure assets, under an exemption to a 1999 law.
Through its J Aron commodities unit - where Blankfein got his start at the bank - Goldman is one of the biggest names in the commodity business. A series of acquisitions in the past few years gave Morgan Stanley a bigger physical presence and JPMorgan far more personnel.
J Aron has a lower-profile role in many physical oil and metal markets than its two chief rivals, and the bank sold off its power plant unit last year. Still, Goldman has footholds in several markets, including a deal to supply crude and market fuel with refiner Alon USA Energy (ALJ.N), and owns metals warehouse firm Metro International Trade Services.
(Reporting by David Henry in New Yorkl; Writing by Jonathan Leff; Editing by Gerald E. McCormick and Jeffrey Benkoe)