* Morgan Stanley Q1 commodity revenues fall 77 pct
* Total commodity revenues on Wall Street down 54 pct-Coalition
By David Sheppard and Barani Krishnan
NEW YORK, May 15 Global investment banks suffered another bruising decline in commodity trading in the first three months of this year, new reports showed on Wednesday, with Morgan Stanley's revenues collapsing to a quarter of what they were a year ago.
While industry heavyweights Goldman Sachs and JPMorgan reported slightly higher revenues year-on-year in detailed quarterly filings made with the SEC in the past week, the overall sector continues to be squeezed by increased regulation, tepid markets, and low levels of client activity.
Combined commodities revenues at the 10 largest banks fell 54 percent in the first three months of 2013 to just $1.2 billion, according to a report by Coalition, a London-based analytics firm that surveys sector performance at investment banks.
"The biggest declines came in energy, where we've seen lower revenues from oil trading and partial exits from trading European gas and power for some banks," Coalition said.
"We also saw far lower revenues from institutional investors as they continue to shift out of the asset class."
The dramatic reversal of fortunes for commodity trading on Wall Street has been well documented, with Goldman Sachs, JPMorgan and Morgan Stanley all reporting double-digit percentage declines in revenues for oil, grains and copper trading last year.
The latest quarterly data indicates the worst may not be over.
Coalition, which does not break out individual bank results in its quarterly report, said capital constraints and regulatory challenges were forcing some banks to re-evaluate the scope and scale of their commitment to parts of the commodities business.
Morgan Stanley, which has looked at a possible sale or restructuring of its commodity arm, said in its first quarter earnings call last month that commodity revenues had picked up from the fourth quarter, the bank's worst in commodities in 18 years, but that "cyclical headwinds" continued to weigh.
In its quarterly filing with the SEC last week, Morgan Stanley provided the first hard numbers on its performance: a 77 percent drop in revenues versus the first quarter of 2012, partly as a result of a drop in the number of structured deals the bank did for clients.
The bank declined to comment on the figures on Wednesday.
JPMorgan reported commodity revenues from 'principal transactions' of $688 million in the first three months, up from $627 million in the same period last year.
Goldman Sachs revenues edged up to $493 million from $471 million in the same period of 2012, according to its quarterly SEC filing. Goldman says its results may differ as they do not include the effect of hedging interest rate and foreign exchange moves on its commodities business.
Tricumen, a UK-based markets intelligence firm, said it estimated a less dramatic decline among the top players, pegging the first quarter drop at 15 percent to $2.3 billion among the 13 biggest banks in commodities.
Seb Walker, a managing partner at Tricumen, said that while commodity revenues were down overall, banks had seen growth in Asia-Pacific, and some were still "selectively investing" in parts of the sector where they saw opportunities.
"Out in Asia, the focus is increasingly shifting to oil from metals," Walker said.
"In the United States, there's been some positive growth in oil because of the opportunities created by the U.S. shale boom."
U.S. investment banks have scaled back market exposures since the Dodd-Frank financial reform law passed in 2010 to limit excessive risk-taking by U.S. financial institutions.
Goldman Sachs and Morgan Stanley also face pressure from the Federal Reserve over their ownership of physical commodity assets after their conversion to financial holding companies in 2008.