Market sees fire sale ahead as banks pull out of warehousing businesses

JP Morgan understands the corrosive effect that political and regulatory scrutiny can have on perceptions of value better than most participants in the metals markets.

When the bank first bid for a large chunk of RBS Sempra Commodities at the start of 2010, it valued the metals, oil, gas and power assets at $4 billion.  But by April that year, Barack Obama’s support for a plan to put a halt to proprietary trading within deposit-taking banks had prompted JP Morgan to slash its bid to $1.7 billion. Rival bidders Deutsche Bank and Macquarie apparently felt even that was too handsome a price for a business that was about to have its wings clipped by former Fed chairman Paul Volcker. Fast forward three years, and a Senate investigation into the activities of banks in physical commodities, as well as a Federal Reserve review of the same subject, has prompted JP Morgan to look critically at the future value of the assets it acquired in the...

Published

Mark Burton

July 30, 2013

10:10 GMT

London