Commodities revenue of the 10 largest banks slumped 245 last year, the first contraction since at least 2008, according to Coalition, a London-based analytics company.
The total fell to $6 billion from $8 billion in 2011, Coalition said in a report today. Their investment banking revenue rose 10% to $159 billion, the first gain in three years, Coalition estimates.
“Low volatility and reduced client activity led to a 24% drop in revenues,” Coalition said in the report. “Performance was also subdued by ongoing concerns about increased regulation and capital sensitivity, pushing banks to re-evaluate their commodities strategies.”
Banks including Goldman Sachs Group Inc. and Morgan Stanley face higher capital requirements and tightening regulation that restrict commodities trading.
Barclays Plc shut its speculative agriculture trading and said this week its commodities unit will focus on “core banking, financing and risk management.” Its commodities trading staff shrank by a third last year and risk exposure to commodities was cut in half, according to the bank.
The 10 companies covered by Coaltion are Bank of America Corp., Barclays, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs, JPMorgan Chase & Co., Morgan Stanley, Royal Bank of Scotland Group Plc and UBS AG. Spokespeople for nine of them declined to comment on the report’s findings. Bank of America was unable to immediately respond to a request for comment from Bloomberg.
Fixed income, currencies and commodities earnings rose 21% last year, Coalition said. The banks don’t break out commodities revenue from the total.
Goldman Sachs’s net revenue in commodities were “significantly lower” in the fourth quarter, it said Jan. 16. Morgan Stanley’s revenues were “de minimus,” the bank said Jan. 18.