* Sector sees increase after years of declines
* Boosted by U.S. power & gas, investor products
By Eric Onstad
LONDON, May 19 (Reuters) - Commodities revenue at the top 10investment banks climbed 26 percent in the first quarter afteryears of declines, due to higher U.S. power and gas turnover aswell as stronger investor interest, a consultancy said onMonday.
Revenue from commodities for top banks in the first quarterrose to $1.8 billion from $1.4 billion in the same period lastyear, London-based financial industry analytics firm Coalitionsaid in a report.
"The cold winter in North America created volatility and hada positive impact on U.S. power and gas revenues," it said.
"Additionally, investor product performance recovered from avery low base as client activity levels showed someimprovement."
Commodities have been the best performing asset class so farthis year and investors have warmed to the sector to providediversification in portfolios as it becomes more sensitive tosupply-demand fundamentals and less to macro-economic factors.
The 19-commodity Thomson Reuters/Core Commodity CRB index is up 9.4 percent this year after shedding 5 percentlast year.
Wall Street investment banks typically do not break downtheir commodity revenue, preferring to cite it as part of thebroader fixed income, currency and commodities category (FICC).
Commodities was the only sub-sector showing an increasewithin FICC, but it was not enough to keep FICC revenues fromfalling 16 percent to $22 billion, Coalition said.
Banks' commodities revenue had been steadily declining inrecent years as some institutions slashed exposure and otherscompletely shut down commodities units, hit by tougherregulation and higher capital requirements after the globalfinancial crisis.
The top banks' commodities revenue came in at $4.5 billionlast year, less than a third of the $14.1 billion they racked upin 2008 at the height of the commodities boom.
British bank Barclays was the latest institution tojoin the exodus last month when it said it planned to quit mostof its commodities trading businesses.
JPMorgan Chase has sold its physical commoditiesunit, and Deutsche Bank last year largely exitedcommodities trading.
Coalition tracks the following banks: Bank of AmericaMerrill Lynch, Barclays, BNP Paribas,Citigroup, Credit Suisse, Deutsche Bank, GoldmanSachs, JPMorgan Chase, Morgan Stanley and UBS. (Reporting by Eric Onstad, editing by David Evans)