* Banks' commodity revenue increases to $3.3 bln in H1
* Driven by U.S. power and gas, more investor appetite
By Eric Onstad
LONDON, Aug 28 (Reuters) - Commodities revenue at the top 10investment banks climbed by about a fifth in the first half ofthe year as a cold winter boosted business in U.S. power and gasand some investors returned to the sector, a consultancy said.
Revenue from commodities for the leading banks rose 21percent to $3.3 billion in the first six months after falling bya similar percent last year, London-based financial industryanalytics firm Coalition said in a report on Thursday.
"Despite a sequential decline in 2Q, outperformance wasdriven by strong revenues in U.S. power & gas on the back of thecold winter, combined with a general improvement in investorappetite," Coalition said.
Many investors had shunned commodities in recent years dueto lacklustre performance and as the sector was buffeted byeconomic events, moving in step with other assets.
Commodities was the best-performing asset class in the firsthalf as the sector became more sensitive to supply-demandfundamentals and less to economic factors, offeringdiversification again for investor portfolios.
While some investors are returning to the sector, banks arestill departing from commodities trading, due partly to tougherregulation and higher capital requirements after the globalfinancial crisis.
In the first quarter, banks' commodities revenue rose by 26percent, the first rise in first-quarter revenue since 2011.
The 19-commodity Thomson Reuters/Core Commodity CRB index gained 10 percent in the first half after shedding 5percent in the full year 2013.
Since end-June, the index has pared gains after somecommodities markets lost steam, including oil and grains,weighed down by plentiful supplies. So far this year, the CRB isup 3.8 percent.
Banks' commodities revenue has been steadily declining inrecent years as some institutions have slashed exposure andothers have shut commodities units.
Credit Suisse last month became the latest bank tojoin the exodus, saying it was winding down commodities trading,joining the likes of Deutsche Bank, JPMorgan and Barclays in either exiting or significantlydownsizing their activities in commodities.
The top banks' commodities revenue came in at $4.5 billionlast year, less than a third of the $14.1 billion they racked upin 2008 at the height of the commodities boom.
Coalition tracks the following banks: Bank of AmericaMerrill Lynch, Barclays, BNP Paribas,Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley and UBS. (editing by Jane Baird)
Barclays (BARC)