NEW YORK (Reuters) - JPMorgan trimmed its commodities trading risk in the third quarter while upping its risk in currencies and bonds, as heightened volatility across markets reduced the attractiveness of riskier assets like raw materials.
JPMorgan Chase & Co, the first major U.S. bank to announce results for the period, reported lower third-quarter profits, including a decline in quarterly revenues in its Fixed Income Markets business, which includes commodities.
The banks said it had cut its average value at risk (VaR) in commodities to $15 million in the third quarter from $16 million in the second quarter. It was up from $13 million in the third quarter of 2010.
VaR is an industry measure for how much of a bank’s money is at risk on a day for trading a particular asset class.
The bank does not break out commodity results separately, and made no reference to them after reporting a 22 percent quarterly decline in revenues in its Fixed Income Markets business.
Commodity prices whipsawed in the third quarter as fears of a slowing U.S. economy and the European debt crisis roiled markets, many of which had jumped to multi-month or year highs at the start of this year.
The Reuters-Jefferies CRB Index of 19 commodity futures fell by 12 percent over the quarter.
JPMorgan’s VaR as a whole fell in the third quarter, averaging $53 million versus $58 million in the second quarter due to reduced risks in equities as well as commodities.
In equities, the bank’s VaR averaged $19 million versus $25 million previously. For fixed income instruments such as bonds, its risk levels rose to $48 million from $45 million, and for currencies, they were up to $10 million from $9 million.
The bank’s shares fell 1.5 percent in premarket trading to $32.70.
Reporting by David Sheppard; editing by John Picinich