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Commodities income lifts bank's book

BANK of America Corp said its revenue from commodities jumped more than tenfold in the first quarter, after adding the energy businesses of investment bank Merrill Lynch which it acquired last year.

Bank of America said sales and trading revenue from commodities ended the first three months of 2009 at US$536 million, versus US$46 million in the fourth quarter of 2008. The company did not break out profit figures for the commodities business.

Commodities also accounted for 9 percent of the bank's total sales and trading revenue of US$5.98 billion.

The volatility in commodities rose to US$21.3 million in the first quarter from US$2 million previously, Bank of America said. This measure is a variance to the Value-at-Risk used to calculate the maximum daily risk in trading a particular market - in this case, commodities.

One company

Bank of America said the better result for commodities "was driven by the power and natural gas markets" and "the addition of Merrill Lynch" which sold itself to Bank of America to avoid bankruptcy last year. The two are reporting results for the first time as one company.

The Merrill buyout helped Bank of America join Wall Street banks like Goldman Sachs and JPMorgan Chase in reporting stronger earnings from commodities in the first quarter as prices of oil and most raw materials rebounded from last year's lows.

Bank of America had a relatively small presence in commodities before the buyout, which gave it ownership of Merrill's Entergy-Koch, a firm with an energy trading operation and a gas pipeline.

Previously, Bank of America ran an oil trading desk in Singapore, which it closed in 2003 after losing nearly US$100 million.


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