(Reuters) - Goldman Sachs’ commodities trading risk was flat in the first quarter versus the fourth, making it the second Wall Street bank to keep risk levels steady as raw materials prices saw slight gains on the average for the period.
Goldman’s value-at-risk in commodities averaged $26 million per day, the same as in the fourth quarter and down sharply from $37 million in the first quarter of 2011, the closely watched U.S. investment bank said in quarterly results issued on Tuesday.
Value-at-Risk, or VaR, is an industry term for the maximum amount of money a financial institution is willing to lose on a day for trading a particular asset class.
Goldman’s rival JPMorgan Chase reported last week that its commodities VaR barely changed in the first quarter, averaging $21 million versus the $20 million in the fourth quarter. JPMorgan’s risk levels in commodities were, however, at their highest since the third quarter of 2009, indicating the big push it had made toward the asset class in the past two years.
Commodity prices in the first quarter notched their second straight quarterly gain although gains were modest on average. The Thomson Reuters-Jefferies CRB index, which tracks 19 mostly U.S.-traded commodity futures markets, finished the quarter up 1 percent after steep price gains in gasoline, soybeans and copper were offset by sharp drops in natural gas and coffee.
Goldman Sachs and Morgan Stanley, once the biggest names in commodities trading, have shuttered proprietary trading desks in anticipation of tighter U.S. regulation aimed at curbing speculation after the financial crisis.
While Goldman and Morgan Stanley were cutting back in commodities, their rival JPMorgan achieved record revenues above $2.8 billion from commodities last year, building up its presence through a series of acquisitions.
For the first quarter as a whole, Goldman’s earnings fell from a year earlier but were better than many analysts had anticipated, thanks to aggressive cost-cutting and better-than-expected investment banking and trading revenues. It earned $3.92 per share for the quarter, versus $4.38 in the year-ago period.
Reporting By Barani Krishnan; Editing by Gerald E. McCormick