* Hit by fragile investor interest, low volatility
* U.S. oil and gas especially weak
* Many banks closing or reducing commodity businesses
LONDON, Feb 18 (Reuters) - Commodities revenue at the top 10investment banks dropped 18 percent in 2013 in a third year ofdeclines due to weak investor interest and low volatility, aconsultancy said on Tuesday.
Revenue from commodities for top banks fell to $4.5 billionlast year from $5.5 billion the previous year, London-basedfinancial industry analytics firm Coalition said in a report.
Many banks have slashed their commodities businesses andothers have completely shut down commodities units, which alsohave been hit by tougher regulation and higher capitalrequirements after the global financial crisis.
JP Morgan Chase is in the process of selling itsphysical commodities unit, and Deutsche Bank saidlast year it was largely exiting commodities trading.
The banks' 2013 commodities revenue is less than a third ofthe $14.1 billion they racked up in 2008 at the height of thecommodities boom.
"Revenues continued to decline, affected by a depressedclient environment and low volatility. In 4Q 13, performance inU.S. power and gas was particularly weak," the report said.
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).
Overall FICC revenues last year slid by 19 percent to $73.9billion, Coalition said.
Coalition tracks the following banks: Bank of AmericaMerrill Lynch, Barclays, BNP Paribas,Citigroup, Credit Suisse, Deutsche Bank, GoldmanSachs, JPMorgan Chase, Morgan Stanley and UBS.
The 19-commodity Thomson Reuters/Core Commodity CRB index shed 5 percent last year but is up 4.7 percent so farthis year.
Barclays (BARC)