January 14, 2011 / 3:50 PM / 9 years ago

UPDATE 1-JPMorgan Q4 commods risk steady after market rally

 * Commods risk steadies in Q4 after sharp drop in Q3
 * VaR may be replicated by other Wall Street banks   (Updates with details and commodities risk for top-tier Wall Street banks)
 NEW YORK, Jan 14 (Reuters) - JPMorgan Chase & Co’s (JPM.N) commodities trading risk steadied in the fourth quarter after a rally in oil, metals and grains, marking a shift from the third quarter when it cut risk to pare back on proprietary trading.
 Value-at-Risk (VaR) for commodities at JPMorgan stood at $14 million in the fourth quarter compared with $13 million in the third quarter, the U.S. investment bank said in earnings results released Friday.
 VaR is a standard industry measure for how much of a bank’s money is at risk on any given day for trading a particular market.
 JPMorgan’s commodities VaR stood at $20 million in the second quarter, before it began winding down proprietary trading in commodities and other financial instruments to comply with U.S. regulations limiting how much of its own money a bank can trade with.
 For the fourth quarter, JPMorgan’s earnings jumped from a year ago, but much of the gain came from dipping into money previously set aside to cover bad loans. Net profit rose to $4.8 billion, or $1.12 a share, from $3.3 billion, or 74 cents a share, a year ago. Analysts on average had expected net profit of $1 a share, according to Thomson Reuters I/B/E/S.
 JPMorgan typically leads Wall Street’s top-tier banks in reporting earnings for a quarter and its results have been a good indicator in the past for the rest of the industry.
The following is the VaR in commodities at leading Wall Street banks since the start of 2009 (in $ millions):
                    Average commodities VaR by quarter
              1Q09  2Q09  3Q09 4Q09  1Q10 2Q10 3Q10 4Q10 JPMorgan Chase     20   22   23   17    15   20   13   14 Goldman Sachs      40   40   27   38    49   32   29   N/A Morgan Stanley     26   23   25   23    27   29   32   N/A BofA MerrillLynch  20.1 20.6 19.4 20.6  22.2 23.2 19.4 N/A * Note: Maximum risk in a day, based on a 95 percent confidence level.  (Editing by Jim Marshall)     

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