Strategy
Deutsche Joins Trend Of Quitting Commodities Business
Frankfurt-headquartered Deutsche Bank is significantly scaling back its commodities business, in a cost cutting move that will shrink the firm’s balance sheet even more
Frankfurt-headquartered Deutsche Bank is significantly scaling back its commodities business, in a cost cutting move that will shrink the firm’s balance sheet even more.
Deutsche is exiting its trading desks for energy, agriculture, base metals and dry bulk over the next two years and will cut around 200 jobs worldwide as a result of the move. Instead, Deutsche will be focusing on its core competencies of financial derivatives and precious metals, the firm said in a statement.
The move comes at a time when increased regulatory and capital costs have made the commodities business unattractive for banks, with major firms like JP Morgan, UBS and Credit Agricole having scaled back or sold their commodities units.
“The decision to refocus our commodities business is based on our identification of more attractive ways to deploy our capital and balance sheet resources. This move responds to industry-wide regulatory change and will also reduce the complexity of our business,” said Colin Fan, co-head of corporate banking & securities at Deutsche Bank.
Deutsche itself has struggled in the recent trading environment, revealing a 48 per cent drop in sales and trading in the third quarter of 2013 compared to the same time in 2012. As such, the firm had already been cutting back in commodities markets and warned in October that commodities revenues had been hit by weaker client activity.
In addition, David Silbert, former head of commodities, left Deutsche earlier this year to form TrailStone, a commodities merchant and logistics company.
According to Deutsche, a special commodities group will manage an orderly wind down of the commodities businesses, while the financial derivatives and precious metals businesses will be integrated into Deutsche Bank’s Fixed Income and Currencies platform.
The firm also reiterated that the move “will have no material impact on the bank's financial results”.
