The biggest banks are employing the fewest commodity traders, salespeople and analysts in at least four years as tighter regulations and the second drop in prices since 2001 spur cutbacks.
Total headcount in commodity units at the 10 largest banks, from Goldman Sachs Group Inc. to Barclays Plc, stood at 2,290 at the end of September, about 4% less than at the end of 2012, according to data starting in 2009 from Coalition, the London-based analytics company. Pay for those workers may drop 13% on average this year, a fourth straight decline, said Options Group, a recruitment company.
Investors pulled a record $34.1 billion from commodity funds since December and prices tracked by Standard & Poor’s are headed for their first annual drop since 2008. JPMorgan Chase & Co., the biggest U.S. lender by assets, is seeking to sell its physical commodity business and Deutsche Bank AG announced cutbacks today. The Federal Reserve is reviewing banks’ control of raw-material assets and regulators are demanding more reserves to cover losses.
“Commodities revenue has been hit by lower client activity and a lack of volatility, combined with enhanced capital adequacy requirements,” said George Kuznetsov, the head of research at Coalition. “In 2011-12, revenue declined, mainly due to energy products, while 2013 results have been affected by significant outflows from institutional clients.”
Commodity revenue will drop 14% to $4.7 billion this year at the biggest banks, which are Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America Corp., Citigroup Inc., BNP Paribas SA, Barclays, Credit Suisse Group AG, Deutsche Bank and UBS AG, according to Coalition.
Officials from all 10 banks tracked by Coalition declined to comment. Its headcount measure is based on estimates for the firms back to 2009 and some may be expanding staff and revenue. Deutsche Bank today said it will exit dedicated energy, agriculture, dry bulk and base metals trading and transfer financial derivatives and precious metals desks to its fixed income and currencies. About 200 people will be affected, said a person familiar with the matter, who asked not to be identified because the matter isn’t public.
The three with the most commodity staff saw a drop on average to 330 employees in the third quarter from 350 at the end of 2012 and 390 in December 2011, said Kuznetsov.