Strategy

Deutsche Joins Trend Of Quitting Commodities Business

Sandra Kilhof, Reporter, 9 December 2013

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Frankfurt-headquartered Deutsche Bank is scaling back its commodities business, in a cost-cutting move that will shrink the firm’s balance sheet even more and eliminate some 200 jobs worldwide.

Deutsche Bank is scaling back its commodities business in a cost-cutting move that will reduce the German firm’s balance sheet and eliminate some 200 jobs worldwide.

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 focus on financial derivatives and precious metals, the firm said in a statement.

A New York spokesperson said the bank will continue to deal in commodity indexes, Reuters reported.

The move comes at a time when increased regulatory and capital costs have made the commodities business seem unattractive for some banks, with firms like JP Morgan, UBS and Credit Agricole having all 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 and securities at Deutsche Bank.

Deutsche revealed a 48 per cent drop in sales and trading in the third quarter of 2013 compared to the same time in 2012. The firm warned in October that commodities revenues had been hit by weaker client activity.

Meanwhile, David Silbert, former head of commodities, left Deutsche earlier this year to form TrailStone, a commodities merchant and logistics company.

Deutsche said a commodities group will manage an orderly wind down of its 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.”

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