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Deutsche Bank Cuts 200 as Commodities Jobs Fall to 2009 Low

Thursday, 05 Dec 2013 10:56 AM

Deutsche Bank AG, Europe’s biggest investment bank, will cut about 200 jobs in commodities as it shrinks its trading business at a time when headcount at commodities units at the top 10 banks is already at the lowest since 2009 amid tighter regulations and sliding revenue.

The bank will exit dedicated energy, agriculture, dry bulk and base metals trading and transfer its financial derivatives and precious metals desks to the fixed income and currencies division. The decision will have “no material impact” on earnings, Deutsche Bank said in an e-mailed statement from Frankfurt.

Deutsche Bank is joining JPMorgan Chase & Co. in cutting back after investors pulled a record $34.1 billion from commodity funds globally since last December and prices tracked by Standard & Poor’s are headed for their first annual drop since 2008. The Federal Reserve is reviewing banks’ control of raw-material assets and regulators are demanding they set aside more reserves to cover potential losses.

“Commodities is a cyclical business,” said George Kuznetsov, the head of research at Coalition, a London-based analytics company. “Banks with a higher focus on institutional clients will scale their businesses back to key products, while larger corporate franchises will continue to be active across a broader set of products.”

Job Losses

About 200 people will lose their jobs or get moved to a different company, if Deutsche Bank can sell the businesses they work for, said a person familiar, who asked not to be identified because the information isn’t public. Deutsche Bank’s investment banking and trading unit, which includes commodities, employed 25,062 people at the end of September, according to company filings.

Total headcount in commodity units at the 10 largest banks, from Goldman Sachs Group Inc. to Deutsche Bank, stood at 2,290 at the end of September, about 4 percent less than at the end of 2012, according to data starting in 2009 from Coalition. The banks will receive 14 percent less revenue from commodities this year, Coalition said in a report last month.

“The decision to refocus our commodities business is based on our identification of more attractive ways to deploy our capital and balance sheet resources,” Colin Fan, co-head of Deutsche Bank’s investment banking and trading unit, said in the statement. “This move responds to industry wide regulatory change and will also reduce the complexity of our business.”

JPMorgan, the biggest U.S. bank by assets, said in July it plans to get out of the business of owning and trading physical commodities ranging from metals to oil.

Commodities Revenue

Deutsche Bank generated 1.29 billion euros ($1.75 billion) from trading fixed income, currencies and commodities in the third quarter, accounting for 43 percent of the revenue from investment banking and trading, company filings show. It doesn’t publish stand-alone figures for the commodities arm.

The bank generated $881 million in commodities revenue in 2012, according to a JPMorgan report on April 11. Deutsche Bank named Louise Kitchen and Richard Jefferson as co-heads of commodities this year, replacing David Silbert, who left the bank. It dismissed power and gas traders in the U.S. last year as part of the 1,900 job cuts.

Revenue at Deutsche Bank’s commodity unit in Asia expanded 10 percent to 20 percent each year since 2010, and the bank expects to boost market share in precious metals and commodity financing, Stuart Smith, a managing director in Singapore, said before today’s announcement.

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Deutsche Bank AG, Europe's biggest investment bank, will cut about 200 jobs in commodities as it shrinks its trading business at a time when headcount at commodities units at the top 10 banks is already at the lowest since 2009.
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2013-56-05
Thursday, 05 Dec 2013 10:56 AM
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