Deutsche Bank: to Shrink in Commodities as Revenue Slides

According to Bloomberg,

Deutsche Bank AG (DBK), Europe’s biggest investment bank, will shrink its commodities trading business as the industry faces tighter regulations and a drop in 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 today.

Deutsche Bank is joining JPMorgan Chase & Co. in downsizing 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.

“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 the 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.”

Job Losses

Deutsche Bank (Bloomberg)

Deutsche Bank (Bloomberg)

About 200 people will be affected by the measures, which include job losses or the sale of individual businesses, said a person familiar with the matter, who asked not to be identified because the information isn’t public. A Deutsche Bank official declined to comment on the measures.

The world’s 10 largest investment banks, including Goldman Sachs Group Inc. and Morgan Stanley (MS), will receive 14 percent less revenue from commodities this year, London-based analytics company Coalition said in a report last month.

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