Bloomberg News

JPMorgan Beat Goldman in Commodities Revenue Last Year

March 20, 2014

JPMorgan Chase & Co. (JPM:US) leapfrogged Goldman Sachs Group Inc. last year to be the largest bank in raw materials revenue before announcing the $3.5 billion sale of its physical commodities business.

Goldman, which earned the most money from raw materials among the top 10 investment banks in 2012, ranked second last year and Morgan Stanley was third, London-based analytics company Coalition said in a report e-mailed today.

Two of the top three banks by commodities revenue, JPMorgan and Morgan Stanley, are selling parts of the business amid slumping revenue and concern among regulators that banks could control prices if they own commodities as well as trade them, or suffer losses that would endanger the financial system.

Commodities revenue at the 10 largest banks slumped 18 percent last year to $4.5 billion because of a “depressed client environment” and low volatility, Coalition estimated in February. The Standard & Poor’s GSCI gauge of 24 raw materials dropped last year for the first time since 2008. The gauge’s 100-day historic volatility fell to as low as 10.5 percent in April, from as much as 23.8 percent in January 2012, data compiled by Bloomberg show.

The Federal Reserve said in July it might force insured lenders to get out of physical commodities, and JPMorgan agreed later that month to pay $410 million to settle claims that it manipulated power markets, without admitting wrongdoing.

JPMorgan, Goldman Sachs and Morgan Stanley (MS:US) declined to comment on the Coalition report.

Mercuria Purchase

JPMorgan said yesterday it’s selling its physical commodities unit to Mercuria Energy Group Ltd. for $3.5 billion. The unit had $3.3 billion in assets and generated $750 million in annual operating profit before compensation costs, according to people who have seen documents related to the sale.

The bank will continue to provide services and products tied to commodities including financing, market-making and the vaulting and trading of precious metals, it said yesterday. JPMorgan was the top lender to mining and energy companies last year, data compiled by Bloomberg show.

Morgan Stanley agreed in December to sell its global oil merchant unit to OAO Rosneft. The terms of the deal weren’t disclosed.

Deutsche Bank AG (DBK), Barclays Plc and BNP Paribas SA were among “tier two” performers, rated No. 4 to No. 6 for commodity revenue, Coalition said, without providing specific rankings.

JPMorgan was the largest investment bank, with $23.3 billion in revenue and $12.5 billion in fixed income, currencies and commodities, Coalition said. Goldman Sachs, Bank of America Corp. (BAC:US), Deutsche Bank and Citigroup Inc. (C:US) tied for second place in investment banking revenue, it said.

To contact the reporter on this story: Maria Kolesnikova in London at mkolesnikova@bloomberg.net

To contact the editors responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net Andrew Reierson


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Companies Mentioned

  • JPM
    (JPMorgan Chase & Co)
    • $56.63 USD
    • 0.43
    • 0.76%
  • MS
    (Morgan Stanley)
    • $33.32 USD
    • 0.10
    • 0.3%
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