Thursday, February 14, 2013

Commodity Revenue for Investment Banks Plunges in 2012

Revenue for investment banks from commodities dropped in 2012, with intrusive regulations and increased capital requirements resulting in less interest from clients. Another factor was volatility for the year was relatively low, also affecting interest in the sector.

The drop was a huge 25 percent from 2011, with revenue coming in at $6 billion for 2012, down significantly from the $8 billion in revenue generated the year before.

Ten banks were by consultant Coalition, including Bank of America/Merrill Lynch (BAC), Barclays (BCS), Citigroup (C), Credit Suisse (CS), Deutsche Bank (DB), JP Morgan (JPM), RBS (RBS), Goldman Sachs (GS), Morgan Stanley (MS) and UBS (UBS).

A report released by Coalition said, "Low volatility and reduced client activity led to a 24 per cent drop in revenues. Energy, investor products and precious metals options businesses were notably affected.

"Performance was also subdued by ongoing concerns about increased regulation and capital sensitivity, pushing banks to re-evaluate their commodities strategies."

In its quarterly results last month, Morgan Stanley said the commodity revenue for the fourth quarter was the lowest since 1995.


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