JP Morgan Aims to Sell Commodities Business

Joe Goldman |

JP Morgan Chase (JPM) hopes to sell its physical commodities business as part of its efforts to reassess its position in various of financial markets.

According to a press release, the bank hopes of to sell a number of assets including oil pipelines, power plants, and its Henry Bath metals warehousing subsidiary, among others. The firm intends to allocate its resources and efforts elsewhere.

“To maximize value, the firm will explore a full range of options over time including, but not limited to: a sale, spin off or strategic partnership of its physical commodities business,” read the press release.

JP Morgan also announced that it will remain “fully committed” to traditional banking activities, including financial derivatives. The firm will also retain its vaulting and trading precious metals operations.

JP Morgan became a major player in physical commodities after acquiring Bear Stearns in 2008 and RBS Sempra Commodities in 2010. However, the firm has since run into public scrutiny and legal trouble, facing a potential $410 million settlement over power market manipulation and other regulatory conflicts.

While it’s tough to predict exactly how much JP Morgan’s physical commodities business is worth, it will likely fetch quite a bit on the open market. According to Reuters, JP Morgan’s commodities business was considered the largest on Wall Street, reporting $2.4 billion in 2012 revenue. The division also supplied crude oil to the largest refinery on the East Coast and held enough electricity contracts to power millions of homes.

“JP Morgan has built a leading commodities franchise in recent years, achieving a top-ranked revenue position. The business has been consistently name as a top client business in Greenwich Associates’ annual client surveys and was recently named Derivatives House of the Year by Energy Risk Magazine,” read the ress release.

JP Morgan’s shares remained unchanged in after-hours trading on Friday, as the specifics of the potential sale remain widely unknown.

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Companies

Symbol Name Price Change % Volume
JPM JP Morgan Chase 83.54 0.28 0.33 11,783,844
BMSAF Bank Millennium Spoloka Akcyjna GDR Reg S 0.23 0.00 0.00 0

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