Banks see jump in commodities revenue, and it’s a bad thing
On the whole, Wall Street suffered through a rather difficult first quarter, with dwindling fixed income revenue as the headliner. The quarter offered one pleasant surprise, though. Commodities revenues rose to a two-year high. Unfortunately, those numbers have nowhere to go but down.
The ten largest investment banks saw their raw materials revenue jump 26% to $1.8 billion, the most since the first quarter of 2012, according to Coalition. The performance helped soften the blow from sputtering fixed income trading units, which booked just $22 billion in revenue in Q1, down 16% year-over-year.
Counting on a repeat performance in commodities will be an impossible ask. For one, the strong quarter had much to do with conditions that are outside of a bank’s control. The miserably cold weather in North America during the first three months of the year played a major role in U.S. power and gas revenue. It was a historic winter, and one that (hopefully) won’t be repeated. The U.S. saw the coldest March in over a decade, according to Bloomberg.
Even more important, most every big bank is selling off their physical commodities assets as new rules are being drafted. Goldman Sachs, Morgan Stanley, Bank of America, Barclays and J.P. Morgan have each announced plans to pull back from their physical commodities businesses.
While $1.8 billion isn’t a huge chunk of revenue considering the balance sheets of the major investment banks, physical commodities is yet another area from which banks are receding. Hundreds of jobs have already been cut. Other employees, like those at J.P. Morgan, will be under new ownership and will be fighting for theirs.
Job Market Pulse (eFinancialCareers)
In the latest hiring new roundup, SocGen is quietly hiring in fixed income, Bank of America is adding small business bankers and BNP plans an Asian push.
Crime Does Pay, Evidently (Bloomberg)
Jordan Belfort, the fraudster made famous by the film “Wolf of Wall Street,” is on pace to make more money this year than in any one as a stockbroker. He’s aiming for a $100 million year, based mostly off speaking engagements.
Trader Ends Pilgrimage (The Guardian)
Former SocGen trader Jérôme Kervie, convicted of making billions in authorized trades, was taken into custody on Monday after a three-month backpacking “pilgrimage” from Italy to France. His walk served as a protest against the “tyranny” of the financial markets.
Citigroup fired two top executives within its Banamex USA unit last year, though reports only surfaced on Monday. CEO Salvador Villar and head of operations Francisco Moreno were ousted due to concerns over money laundering controls. Citi fired 12 Banamex employees last week for failing to prevent fraud.
A group of shareholders are planning to protest Deutsche Bank’s compensation plan during its annual meeting on Wednesday. The German Bank wants to raise the maximum bonus for senior managers to twice that of fixed pay.
Strippers and a Safari (Dealbreaker)
A former UBS banker allegedly booked strippers and a luxury African safari for consultants who were advising on a disputed swaps deal. The consultants were convicted of bribery, and now the former banker, Steven Bracy, is facing a lawsuit.
AT&T’s massive $48.5 billion bid for DirecTV will be a major boon for several banks and M&A boutiques. Goldman Sachs, Bank of America and Lazard would be the three main winners, giving Goldman the top spot on the M&A league table.
Buzz Around the Office
A 22-year-old former Quinnipiac University student was arrested over the weekend after calling in a bomb threat in an attempt to cancel graduation so that her parents wouldn’t discover she had dropped out a year earlier.
Quote of the Day: “We think of Wall Street as being full of these crazy risk takers. But in a lot of schools it's these scared organization kids going to Wall Street.” – Kevin Roose, author of “Young Money”
