Deutsche Bank AG (DB) has sold its natural gas-trading books in North America to Morgan Stanley (MS). The divestiture comes as part of the bank’s strategy to exit its commodities-trading business due to declining profits and stricter regulations. The transaction is also in line with the bank’s goal of gradually winding down its non-core businesses and focusing more on enhancing shareholder value.
The news was first reported by Sparkspread, the real time energy and trading news portal. The details of the deal, however, have not been disclosed.
Notably, Morgan Stanley bought Deutsche Bank’s bulk commodities trading books in coal, iron ore and freight forward contracts in Jul 2014 (Read more: Morgan Stanley Buys Deutsche Bank's Commodities Trading Biz ).
In the same month, Citigroup Inc. (C) took over the power-trading books of Deutsche Bank in order to boost its energy trading business.
The latest move has come at a time when the physical commodities business of many Wall Street banks, including Morgan Stanley has been under an intense regulatory scrutiny. In June, Morgan Stanley sold its TransMontaigne Inc. – an oil storage, marketing and transportation company – to Tulsa, OK-based NGL Energy Partners LP (NGL) for a cash consideration of $200 million (Read more: Morgan Stanley Sells TransMontaigne Stake). This deal indicated Morgan Stanley’s aim of curtailing its physical commodity business but the company stated that it would continue trading in power and gas, oil and metals.
When all is said and done, the latest acquisition will augment Morgan Stanley’s customer base, making it a strong counterparty for structured products.
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