FACTBOX-Banks expand commodities trading desks

 

Banks are boosting their commodities staff to take advantage of the up swing in prices this year and greater investor risk appetite.

Bank of America, which last autumn acquired Merrill Lynch and its businesses, including commodities, plans to expand its new commodities team by 25 percent over the next two to three years.

Credit Suisse plans to add 100 staff on commodities in the next 18 months.

The shake out of the banking industry last year has created new opportunities for the remaining players, both in terms of recruitment and market share.

Aside from Merrill Lynch, other banks that used to play a significant role in commodities include the now bankrupt Lehman Brothers, which has been acquired by Barclays, and UBS, which axed most of its commodities businesses in the aftermath of the global financial crisis.

Smaller players such as Mitsubishi UFJ are looking to at least double revenues from commodities and energy derivatives.

Banks not already active in spot markets are now trying to establish a foothold there, partly because of concerns about regulatory changes in the derivatives realm.

Standard Chartered expects to start trading commodities on a spot basis next year. Those already with a strong presence in spot markets such as Barclays Capital, RBS Sempra and Credit Suisse are expanding. 

Carbon is another key growth area as banks chase opportunities in this $126 billion market.

MITSUBISHI UFJ

Global head - Tetsuro Kono

History - The bank has been in the market for 20 years and it is active in oil, freight, coal and emissions.

Growth plan - The bank says it will focus on commodities and energy derivatives and expects this to account for 20 percent of its revenue in two years, from 5-10 percent now.

BANK OF AMERICA

Global co-heads - David Goodman and Rob Jones, based in London and Houston respectively. 

History - Merrill Lynch acquired the energy trading businesses of Entergy-Koch.

Focus - Bank of America Merrill Lynch's commodities business includes structuring, trading and marketing natural gas, power, crude oil, refined products, coal, emissions, metals, commodity indices, and structured notes. The company is involved in both financial and physical markets.

Growth plan -- In August 2009, the company announced that it intends to expand its commodities team by 25 percent over the next two to three years in anticipation of strong demand for commodities. In Q3, it made a number of key hires in Asia and the U.S., including a new head of west power trading, and a head of NYMEX gas option trading.

DEUTSCHE BANK

Global head - David Silbert

History - Launched a five-year expansion plan in commodities and energy in 2007.

Focus - Deutsche Bank is active in oil, refined products, metals, gas, power, agriculture and carbon markets as well as financial investments products.

It has a spot presence in metals and uranium but is not active in the physical oil business. 

Growth plan - It has increased its head count by 15 percent so far this year and plans to continue hiring in 2010.

It recently opened a new office in Houston, Texas and started trading U.S. power and gas. A bank spokesman said it had experienced "spectacular" growth in Asia this year.

The bank said it had launched 11 new commodity indices, three new commodity systematic mutual funds and one new commodity exchange traded fund this fiscal year.

BNP PARIBAS

Global head - Lincoln Payton

Staff - Over 1,000

History - Started in commodity derivatives more than 20 years ago and in commodity financing 50 years ago.

Focus - Active in trading crude, oil products, natural gas, European power as well as base metals and soft commodities. 

The bank is traditionally strong in structured financing and helped finance oil major Total's Yemen LNG project due to come on stream in the next few weeks.

Growth plan - The bank said in an e-mailed statement it is expanding its derivatives business to cater to hedge funds.

It is expected to double revenues in commodity derivatives by 2012, supported by the acquisition of activities from Fortis, a bank executive told the Financial Times.

GOLDMAN SACHS

Global head - Isabelle Ealet

Staff - Has more than 200 commodity professionals in locations throughout the world, such as New York, Calgary, Houston, London, Sydney, Singapore and Tokyo

History - Entered the commodities business in 1981 with the purchase of a firm called J. Aron.

Focus - Serving corporate clients and financial investors ranging from hedge funds to institutional investors and private equity firms. It is one of the few investment banks in the world that physically trades and ships crude oil.