It is becoming increasingly difficult for banks to make money on commodity trading. Their income from these operations collapsed to a multi-year minimum.
According to the results of 2017, the incomes of the 12 largest investment banks in the world from commodity trading fell to a minimum since 2006, that is, for the entire settlement period, according to a study by Coalition.
Total revenue from operations with raw materials amounted to $ 2.5 billion, collapsing by 42% compared to 2016.
This is mainly due to low volatility and weak customer activity. Indeed, volatility in 2016 was prohibitive. We remember how that year began – a landslide drop in oil prices, then quotes fell in the moment below $ 30 per barrel.
At the same time, in general, banks' revenue from operations with fixed-income assets in the foreign exchange and commodity markets (FICC) decreased by 11% to $ 68 billion.
Meanwhile, income from trading in stocks and derivatives decreased by 4% last year, amounting to $ 41.8 billion, which is also the minimum figure for the past eleven years. By the way, here you can also refer to low volatility.
The total revenue of the 12 largest investment banks in the world in 2017 decreased by 4% to $ 150.4 billion, compared with $ 156.1 billion a year earlier. In the previous two years, the rate of decline was 3%. Last year’s revenue was the lowest since 2008, the report said.
Coalition includes Goldman Sachs, JPMorgan Chase & Co., Citigroup Inc., Bank of America Merrill Lynch, Morgan Stanley, Deutsche Bank, Barclays, Credit Suisse, UBS, HSBC Bank Plc, BNP Paribas, Societe Generale among the largest investment banks in the world.
At the same time, the analysis of the company does not take into account large Australian and Canadian banks and financial companies of emerging economies, which differ in a significant volume of operations with raw materials.