Commodities revenue down, lenders cut exposure to oil, industrial metals sectors
LONDON, May 24 (Reuters) – Commodities revenue at the 12 biggest investment banks tumbled 40 percent in the first three months of the year as lenders cut exposure to the oil and industrial metals sectors, a consultancy said on Tuesday.
First-quarter revenue from commodity trading, selling derivatives to investors and other activities in the sector slid to $1.1 billion from $1.8 billion in the same period of 2015, financial industry analytics firm Coalition said.
“Oil and base metals underperformed as concerns on the outlook for the energy sector curtailed banks’ risk appetite,” Coalition said in a report. “Precious metals performed significantly better following increased investor demand.”
Both oil and base metals prices were volatile in the first quarter, slumping to multi-year lows before rebounding.
U.S. oil prices crashed below $27 a barrel on Jan. 20 for the first time since 2003 but ended the quarter near $40.
Benchmark copper prices hit a 6-1/2 year low of $4,318 a tonne on Jan. 15 before climbing 12 percent to end the quarter at $4,847, or a rise of 3 percent from the end of 2015.
In contrast, spot gold rallied 16 percent in the first three months of the year, locking in its biggest quarterly rise in nearly 30 years.
The gold surge was driven by concerns about global growth, which battered equities and sparked a wave of safe-haven buying.
In 2015, the banks’ commodities revenue dropped 18 percent, mainly due to slow business in metals and investor products, and also reflecting a return to more normal turnover in the power and gas markets after the previous year’s surge.
Coalition tracks the following banks: Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank , Goldman Sachs, HSBC, JPMorgan , Morgan Stanley, Societe Generale and UBS.
(Reporting by Eric Onstad; editing by David Clarke)