Driving commodities trading operations, Citigroup Inc. (C) purchased Deutsche Bank AG’s (DB) energy and metals book. The news was first published by Reuters.
Notably, Citigroup has also acquired the German bank’s oil and power trading books in the last few months. Citigroup’s commodities trading operations focuses primarily on oil and oil products, power and natural gas, base metals and precious metals.
In the wake of tighter regulations when several Wall Street biggies including Bank of America Corporation (BAC) and JPMorgan Chase & Co. (JPM) pulled back their interests in the commodity trading sector, Citigroup is treading in the opposite direction. It seems Citigroup’s latest move is in line with its strategy to grow its profitable ventures while divesting non-core assets.
On Deutsche Bank’s part, the move came as part of the process of winding down its energy trading business owing to regulatory pressure and lower profits. Notably, in Dec 2013, the German bank announced that it will close its trading operations in energy, agriculture, base metals, coal and iron ore, while continuing with precious metals and a few financial derivatives traders.
Apart from Deutsche Bank, another European counterpart, Barclays PLC, initiated a similar move as it closed its power trading desks in London and New York in Feb 2014.
Notably, during first-half of 2014, commodities revenues climbed up 21% year over year, per a report released in August by Coalition, a U.K. analytics firm. The Coalition Index relates to the performance of the 10 biggest global investment banks including Citigroup, The Goldman Sachs Group, Inc., Morgan Stanley and Credit Suisse Group AG. Trading in U.S. power and gas benefited from the prolonged winter in the country leading to a rise in raw-material revenues. Also, the market witnessed renewed interests among investors regarding commodities.
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