Wall Street battles in commodities trading
Nomura exits, Credit Suisse stumbles? Rates, currencies, commodities counter credit revenue decrease
With Middle Eastern unrest, inflationary pressures in China, and the impact of the earthquake in Japan, commodities trading looks set to lead FICC revenues for 2011. That’s unsettling news for some investment banks that have struggled to compete in commodities. Nomura announced in March that it was getting out of oil and gas trading, cutting four traders and reallocating two more within the organization. The Japanese investment bank is keeping its precious metals trading business but a spokesman says the cut in oil and gas trading was a result of not being able to compete fully in that sector.
Commodities trading is becoming a battleground on Wall Street. In January UBS said it planned to double its headcount in commodities. Citi and Standard Chartered are also planning to hire. Morgan Stanley is expanding headcount moderately in commodities but Credit Suisse seems to be losing the fight. It replaced a five-year alliance with commodities trading firm Glencore International in January with a consulting relationship. Earlier this year the Swiss bank lost its head of commodities, Adam Knight. His move followed an exodus of nine commodities traders in the fourth quarter of 2010 who left to start a hedge fund backed by Blackstone Group.