Goldman Sachs now leads global banks in commodity trading revenues, overtaking JP Morgan in 2014.

A report by Coalition, a financial analytics company, found that while rival banks backed out of the commodity business due to volatility and an increasingly restrictive regulatory environment, Goldman Sachs’ decision to remain in the game has reaped dividend.

Collectively, banks enjoyed a 9% increase in commodity revenue in 2014, despite the chronically low prices of some key commodities. Total revenue was US$4.9bn in 2014 and while it was the first upward tick since 2011, it still represents a fraction of the combined US$14.1bn banks were taking in before the crisis in 2008.

JP Morgan sold its commodities division to trader Mercuria in 2014, while the oil price plunge and concerns over fraud have led to many banks paring back their commodities business in Asia.

Reports have been rife about the losses banks are set to incur due to the falling oil prices. In February, GTR reported that Standard Chartered was expecting the heaviest losses, citing a Macquarie report which said: “StanChart will suffer from a combination of commodity finance-related defaults and revenue pressure, in our view. For StanChart we estimate US$3.9bn stress test losses on its US$61bn commodity exposure. In addition we see the risk that the bank may have to top up currently weak NPL coverage ratios to a more comfortable level of 80% which would cost US$2bn (pre-tax). Adding all negative together, one year of pre-tax profit (2015E) would get wiped out by assuming front end loaded losses and the capital shortfall would increase to just below US$8bn based on our assumptions.”

To add insult to injury, the massive commodity fraud uncovered in Qingdao, China last year is thought to have cost the commodity banking sector billions of dollars, collectively.

Financiers are still licking their wounds, wondering how they can continue to participate in the commodity collateral and repurchasing trade, while ensuring they don’t get burnt again. The industry as a whole is hanging on a knife-edge for the verdict in the Citi-Mercuria tribunal in the High Court, London over a specific cargo of commodities.

Meanwhile, fewer trade finance deals are being done in the region for the first time in a number of years. Data from Citi showed that trade finance declined 1.4% last year compared to a surge of 43.8% in 2013. In December in Hong Kong, the 1.4% contraction in trade finance was the first reversal since December 2009.

While a large part of this can be explained by tougher economic conditions and a slowdown in China, regulatory uncertainty stemming from Qingdao is certainly playing a part. Banks are taking longer to get deals which would have previously been their bread and butter out the door due to increased compliance requirements, while there has been an increase in funds entering the market in an effort to take advantage of the vacuum banks have left.

“I’m seeing tiny funds opening on an almost daily basis – most of which I’ve never heard of. They’ve got the money to lend and they see the commodity trade market here as a relatively easy one to enter,” Philip Gilligan, finance and insolvency partner at Deacons tells GTR.

The survey from Coalition tracked the commodity trading divisions of Bank of America Merrill Lynch , Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Morgan Stanley and UBS.