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By Peter Hobson
LONDON, June 1 (Reuters) - The world's 12 biggest investment
banks cashed in on commodity price volatility caused by the
coronavirus in the first quarter, with big increases in income
from oil offsetting a tumble in precious metals, consultancy
Coalition said.
The banks' net revenue from trading, selling derivatives and
other activities in the commodities sector was around $1.5
billion over January-March, the financial industry analytics
firm said.
That compares to around $1.2 billion in the same period in
2019, it said.
The first quarter was marked by huge swings in commodities
markets as the coronavirus spread across the globe, shutting
industry, confining people to their homes and paralysing supply
chains.
Prices of oil, metals and some other key commodities
slumped, while gold prices in London and New York, the two main
bullion trading centres, saw their biggest divergence in
decades.
Investment banks are often able to profit from volatility
because it can make clients more active and they can bet on
prices moving in a certain direction.
The 12 banks did best in oil, with net revenue almost
doubling from the first quarter of 2019 to around $700 million,
Coalition research director Amrit Shahani said.
Precious metals revenues, however, plunged to less than $100
million from close to $250 million a year ago, he said.
What had been a very profitable quarter was hammered in late
March when prices of New York futures rose sharply above London
rates and the value of banks' positions across the two markets
fell sharply, Shahani said.
Banks' revenues from commodities increased in 2018 and 2019
after a decade of decline since the global financial crisis as
heightened government regulation and poor performance made them
shrink their commodities businesses.
The 12 banks Coalition tracks for its quarterly reports are
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 Peter Hobson; Editing by Veronica Brown and Giles
Elgood)
