JPMorgan to quit physical commodity trade amid scrutiny
By David Sheppard
NEW YORK (Reuters) - JP Morgan Chase & Co is exiting physical commodities trading, the bank said in a surprise statement on Friday, as Wall Street's role in the trading of raw materials comes under intense political and regulatory pressure.
Wall Street's biggest bank said an "internal review" had concluded it should pursue "strategic alternatives" for its physical commodities operations, which includes assets like its Henry Bath metals warehousing subsidiary and a vast global team trading everything from African crude to Canadian natural gas.
The firm will explore "a sale, spinoff or strategic partnership" for its physical arm, the statement said. It said the bank remained "fully committed" to its traditional financial commodity business, including trading derivatives and its activities in precious metals.
The bank's announcement follows a week of unprecedented scrutiny of Wall Street's commodity operations, after the U.S. Federal Reserve said last Friday it was reviewing a landmark 2003 decision that allowed commercial banks to trade in physical markets to "complement" their financial activity.
The move also comes as Chief Executive Jamie Dimon strives to put the bank back on course after a series of costly trading moves and regulatory run-ins, including a potential $410 million settlement over alleged power market manipulation.
The decision is a sharp reversal for the bank that had pushed aggressively into the sector since 2008, when it first acquired a host of physical trading assets and expertise through its acquisition of Bear Stearns during the financial crisis.
That was followed by the acquisition of RBS Sempra Commodities in 2010, allowing the bank to quickly challenge Goldman Sachs and Morgan Stanley for the title of largest commodity business on Wall Street.
A spokesman for JPMorgan did not immediately return a call seeking comment. Continued...