JPMorgan commodity risk unchanged in Q3, prepares physical exit

10/11/2013

Oct 11 (Reuters) - JPMorgan Chase & Co kept its commodity trading risk unchanged in the third quarter from the previous three months, as the bank prepares to exit physical commodities trading, results from the largest U.S. bank showed on Friday.

Value-at-Risk (VaR) in commodities at JPMorgan stood at $13 million in the third quarter, flat with the second quarter and also unchanged from the third quarter of 2012.

The bank is in the process of selling its physical commodity arm in the face of rising regulatory pressure. JPMorgan circulated the offering documents to potential buyers this week, valuing the assets at $3.3 billion, with annual income of $750 million.

In its earnings release, the banks said physical commodities was one part of the bank that was either "non-core" to its customer or carried "outsized operational risk."

JPMorgan, typical of Wall Street banks, groups its commodities revenue under the fixed income category and does not break down the sector individually, often leaving VaR as one of its key risk-reward indicators for commodities.

For the third quarter, JPMorgan said fixed-income revenue fell to $3.4 billion, down by 8 percent from a year earlier.

The bank as a whole reported a $400 million loss for the third quarter, as the biggest U.S. bank by assets tried to put a number of costly legal settlements behind it.

That included a $410 million settlement with the U.S. Federal Energy Regulatory Commission in July, over allegations of market manipulation in U.S. power markets. The settlement with FERC came shortly after the bank announced it was exiting physical commodities trading

The bank said it had about $23 billion in reserve for fighting and settling legal disputes.



Story Copyright © 1999-2014 Reuters HedgeWorld All rights reserved.