* Morgan Stanley Q1 commodity revenues fall 77 pct
* Total commodity revenues on Wall Street down 54
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
"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
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
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