JPMorgan Chase & Co NYE:JPM, the largest U.S. bank, has reportedly attracted the interest of several pension funds and even rival trading houses for its physical commodities operations, which the group decided to shed less than three months ago.
According to the Wall Street Journal, interested parties have signed non-disclosure agreements to review the offer documents that value the assets of the physical commodities business at $3.3 billion, and state it produces $750 million in yearly income before compensation costs.
The firm, which spent five years and billions of dollars building the banking world’s biggest commodity desk, may consider bids for either the entire physical commodities business or separate divisions, reports FT.com (subscription required). These units include base metals, coal, North American power, North American natural gas, European power and gas and Henry Bath, the metal warehousing group. The most valuable is global crude oil, which JPMorgan values at $1.7 billion.
Pushed by higher capital levels and tougher regulation, the U.S. financial giant joins other banks such as Barclays NYE:BCS and Deutsche Bank NYE:DB in a retreat that seems to mark the end of an era in which global investment banks rushed to take advantage of the commodity prices boom.
The bank might also be setting a trend, analysts think, as the first big player to exit physical commodities entirely could be followed by banks that face similar pressures, such as Morgan Stanley NYE:MS and Goldman Sachs NYE:GS.
JPMorgan will be the first Dow member and the first bank to report third-quarter results on October 11, formally kicking off the earnings season.
Reprinted by permission of Mining.com