JPMorgan Chase

JPMorgan sells physical commodities business for US$3.5b

PUBLISHED : Thursday, 20 March, 2014, 10:28am
UPDATED : Monday, 30 May, 2016, 2:05pm

JPMorgan Chase said on Wednesday it had made a deal to sell its physical commodities business for US$3.5 billion as regulators weigh whether to restrict banks’ ability to control power plants, warehouses and oil refineries.

If it’s approved by regulators, the deal would put the commodities business in the hands of energy and commodities trading company Mercuria Energy.

Big banks have long profited from price swings in metals, energy and other commodities. But some had branched out into owning physical facilities.

Last summer, JPMorgan said the possibility of new regulations on whether banks could continue to do that was a factor behind its decision to consider selling some of its physical commodities business, which includes metals and energy assets. The Federal Reserve said in January it would consider new regulations.

JPMorgan said on Wednesday that after the sale it would still provide traditional banking activities in the commodities markets. It would also continue to make markets, provide liquidity and risk management and offer advice to global companies and institutions.

The deal is not expected to have a material impact on JPMorgan’s earnings. The firm’s target is for it to close in the third quarter.