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Commodities Finally Bring Relief for Banks as Revenues Jump

Commodities revenue at major investment banks is showing signs of recovery.

Combined income at 12 top banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. jumped 38 percent to $2.1 billion in the first half, according to analytics firm Coalition Development Ltd. That’s equivalent to almost the entire earnings last year and may signal a turnaround after years of poor results brought about by regulatory scrutiny, curbs on proprietary trading and falling investment by hedge funds.

The year-on-year rebound is partly because of one-off gains in energy and industrial metals, Coalition said in a report Thursday. Oil has been among the best-performing commodities this year on OPEC supply curbs and potential disruptions from U.S. sanctions on Iran. Commodities volatility has also picked up after several years of declines.

The Coalition data is also likely to reflect a recovery in performance at Goldman Sachs Group Inc.’s commodities business, which in 2017 suffered its worst year since the bank went public in 1999. Goldman this year highlighted an improvement at the unit, saying risk-taking in raw materials had increased.

Coalition, which tracks commodities revenues at top Wall Street and European banks, doesn’t comment on specific firms. Banks’ revenue totaled $2.5 billion last year.

The research company monitors activities related to power, gas, oil, metals, coal and agriculture. Other banks tracked by the firm include Morgan Stanley, Societe Generale SA, UBS Group AG and HSBC Bank Plc. The analysis doesn’t include Australian, Canadian or emerging-market banks that have a large presence in commodities.

Source: Bloomberg

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