The investment banks are great to fade. Who can forget Merrill Lynch getting out of commodities in 1998, getting back in 2007 and getting out again in 2009?

Goldman to Review Commodities After Worst Start in a Decade (1)
2017-07-03 09:42:37.984 GMTBy Jack Farchy and Dakin Campbell
(Bloomberg) — Goldman Sachs Group Inc., the dominant
commodities trader on Wall Street, is reviewing the direction of
the business after a slump in the first half of the year,
according to people with knowledge of the matter.
By reconsidering the bank’s long-held view that the
downturn in profitability is cyclical and will eventually
reverse, Chief Executive Officer Lloyd Blankfein, who started
his career in the commodities business, is drawing closer to the
industry’s prevailing wisdom. Morgan Stanley, JPMorgan Chase &
Co., Barclays Plc and Deutsche Bank AG have cut back or exited
commodities trading in recent years amid falling revenue and
tougher regulation.
While the bank flagged the poor results for the first
quarter — without giving specific numbers — the weakness has
continued and the unit’s start to the year has been the worst in
more than a decade, said one of the people, who asked for
anonymity to discuss internal deliberations. The commodities
division was one of the topics of discussion at a board meeting
held in London late last month, the people said.
No decision has been reached and the bank may not pursue
large-scale changes, according to the people. It’s common for
the bank to review struggling business units to see what can be
improved, one of the people said.
“Commodities has been and still is an important business
for our clients and we will continue to invest in it to ensure
we are best meeting their needs,” Michael DuVally, a bank
spokesman, said in an emailed statement.
The informal review is being led by Isabelle Ealet, one of
three global co-heads of the securities division who ran the
commodities unit for five years until 2012 — a golden age for
the division when revenue regularly topped $3 billion per year.
Ealet, who joined Goldman in 1991 as an oil products
trader, is known in the industry for her relentless focus on
controlling costs. In a rare interview a few years ago with the
French magazine L’Expansion, she said: “What I appreciate most
is the culture of results. At Goldman Sachs, you are judged on
your performance.”Peak RevenueGoldman has for decades boasted the leading commodity
franchise among Wall Street banks. Its revenue from commodities
rose from less than $500 million a year between 1981 and 2000 to
a peak of $3.4 billion in 2009, according to a Senate report on
U.S. banks’ involvement in the commodity markets.
Last year, the bank made less than $1.1 billion in revenue
from commodities, according to one of the people. The business
still ranked No. 1 among global investment banks, according to
Coalition Development Ltd., a London-based analytics company.
But this year, Goldman said that “significantly lower” net
revenue from commodities was partly to blame for weak first-
quarter trading results. Client volumes suffered, with crude oil
volatility averaging the lowest level in more than two years,
Chief Financial Officer Marty Chavez said in April.

Major Banks

Major banks’ commodities revenue sank to an 11-year low in
2016, according to Coalition. In the first quarter of this year,
commodities trading revenue across the industry dropped to $800
million, Coalition estimated — down 29 percent from 2016 and
less than a third of the level of 2012.
Separately, the bank has reshuffled senior commodities
executives in recent weeks, with Don Casturo, previously head of
trading in Europe, moving back to the U.S. to serve as the
unit’s chief operating officer, and Jeremy Taylor, who joined
the bank last year from Mercuria Energy Group, moving to London
to take on Casturo’s role.
Owen West, Goldman Sachs’s global head of natural gas
trading and co-head of global power trading, last month accepted
a role in Donald Trump’s administration as assistant secretary
of defense, special operations and low-intensity conflict.