J. P Morgan Chase & Co's commodity revenues fell 12 percent last year, the bank said in a filing on February 20, shedding new light on the unit as the bank prepares to sell its physical trading arm to Swiss-based trader Mercuria.
The drop in commodity revenues at J. P Morgan is the second in two years, and follows tighter restrictions across Wall Street on banks trading with their own money and growing scrutiny of their role in the natural resources supply chain.
It said principal transaction revenues in commodities were $2.073 billion in 2013, down from $2.363 billion the previous year and $2.823 billion in 2011, the bank said in its annual 10-K filing with the US Securities and Exchange Commission.
A bank spokesman declined to comment on the figures. While the data offer a rare glimpse into the bank's large oil, gas, power and metals trading business, they are not considered a definitive indicator.
The revenues don't include the cost of operating its commodities trading operation, which has numbered as many as 600 staff in 10 offices globally.
The figures also do not distinguish between the physical trading team that J. P Morgan is selling and the derivatives activities that it will keep.
Banks also say accounting differences mean the outright numbers are not a complete reflection of how they operate their commodity businesses. No Wall Street firm declares the exact profit or loss of individual trading operations.
But in commodities, the trajectory has been clear. Total commodity trading revenues on Wall Street have fallen by about two-thirds in the last five years, with the top 10 banks notching just $4.5 billion last year, according to London-based analytics firm Coalition.
J. P Morgan announced last summer it was selling its vast physical commodities operations, shortly after reaching a $410 settlement with energy regulators in the United States over allegations the bank had manipulated electricity markets.
Mercuria, a private commodities dealer run by two former Goldman Sachs oil traders, entered exclusive talks with the bank to buy its physical business two weeks ago. J. P Morgan has valued the business at $3.3 billion in documents circulated to potential buyers.
The deal value has yet to be agreed and will depend to a large extent on the valuation of large stockpiles of oil and metals the bank holds, one source said.
At the end of last year, the bank held $10.2 billion in physical commodities, according to the SEC filing, down from $16 billion at the end of 2012. That includes precious metals like gold and platinum that will not be included in any sale.
While the bank is halting its trading of physical oil cargoes and industrial metals, it will continue to trade financial commodity contracts and precious metals for clients.
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