July 26, 2013, 4:44 p.m. EDT
By Christian Berthelsen and Dan Fitzpatrick
J.P. Morgan Chase & Co. is putting its physical commodities operations up for sale amid regulatory scrutiny of Wall Street’s participation in that business, a retreat for a company that in the past decade made a costly effort to become No. 1 in that field.
The holdings on the block include metals warehouses; ownership in power plants around the country; as well as trading desks that buy and sell oil, gas, power and coal. The businesses employ roughly 600 people and were responsible for less than $700 million in revenue through the first half of 2013, said a person familiar with the situation. The bank will continue helping clients hedge energy risks and store gold and silver in vaults.
It isn’t known what this decision means for Blythe Masters, who runs J.P. Morgan’s commodities business. She intends to help the firm look for potential buyers, but it is too early to know what she will do afterward, said a person familiar with the situation.
The decision is the latest move by Wall Street to back away from physical commodities as government officials, companies and consumer groups warn of pitfalls arising from allowing banks to play so many different roles in a market. Over the past decade, Goldman Sachs Group Inc. and Morgan Stanley also bought assets such as oil pipelines, metals warehouses or power plants, seeking profits by planting themselves at the center of the global supply chain for industrial materials despite explicit Federal Reserve prohibitions on ownership of such assets.
Representatives for Goldman Sachs and Morgan Stanley declined to comment.