(Reuters) - Morgan Stanley (MS.N) is considering selling a stake in its commodities unit, CNBC television reported on Wednesday, as regulatory pressures weigh on the outlook for the business.
The investment bank has been exploring a partial sale since at least last year and has talked to several parties, including private equity firm Blackstone Group LP (BX.N), CNBC said, citing sources.
A Morgan Stanley spokeswoman declined to comment.
Morgan Stanley’s commodities unit trades in financial contracts, like oil futures, and ships and stores physical assets through subsidiaries TransMontaigne Inc and Heidmar Inc.
Morgan Stanley, along with Goldman Sachs Group Inc (GS.N), historically has been one of the most active banks trading in commodities.
While the business has generated billions of dollars in revenues for Morgan Stanley through the years, it has come under pressure from weaker trading volumes as well as new regulations that will limit U.S. banks’ trading, risk taking and ability to own physical commodity assets.
CNBC cited regulatory reforms as the reason for a possible sale.
There are also signs that Morgan Stanley’s competitive position is slipping. According to a survey by Greenwich Associates, the bank has fallen to fourth place in the over-the-counter market for commodity derivatives among corporations and investors, behind JPMorgan Chase & Co (JPM.N), Goldman and Barclays Plc’s (BARC.L) Barclays Capital unit.
Morgan Stanley’s commodities trading revenue dropped nearly 60 percent from 2009 to 2011. Based on Reuters’ calculations, revenues peaked at around $3 billion in 2008, declining to about $1.3 billion last year, the lowest since 2005.
Morgan Stanley attributed the decline to “lower levels of client activity.”
JPMorgan had commodity trading revenues of $2.8 billion last year, while Goldman reported $1.6 billion in commodity trading revenue.
Reporting By Lauren Tara LaCapra and Matthew Robinson; editing by Gerald E. McCormick and Jeffrey Benkoe