Major banks’ commodities revenue up first time since 2011

May 20, 2014

Commodities revenue at the top 10 investment banks climbed 26 percent in the January-March period, the first gain in first-quarter turnover since 2011, due to higher US power and gas turnover plus stronger investor interest, a consultancy said. Revenue from commodities for the leading banks in the first quarter rose to $1.8 billion from $1.4 billion in the same period last year, London-based financial industry analytics firm Coalition said in a report on Monday.

It marked the first year-on-year increase in the first quarter since 2011, when revenue surged to $3.3 billion from $1.4 billion in the same period of 2010. Since then the trend had been downward, although there were fluctuations. Part of this year’s gains stemmed from the energy sector, Coalition said. “The cold winter in North America created volatility and had a positive impact on US power and gas revenues,” it said.

“Additionally, investor product performance recovered from a very low base as client activity levels showed some improvement.” Commodities have been the best-performing asset class so far this year and investors have warmed to the sector to provide diversification in portfolios as it becomes more sensitive to supply-demand fundamentals and less to macroeconomic factors. The 19-commodity Thomson Reuters/Core Commodity CRB index is up 9.4 percent this year after shedding 5 percent in 2013.

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