Nearly a decade after entering the U.S. natural gas trading market, Deutsche Bank said Thursday it is significantly scaling back its commodities business and will exit the dedicated trading desks for energy, agriculture, base metals and dry bulk.
A special commodities group has been established to manage the wind-down of the businesses, and no material impact on Deutsche Bank's core competencies of financial derivatives and precious metals is expected, the company said. About 200 traders will reportedly be affected by the decision.
The decision to scale back the commodities business is part of the company's "Strategy 2015+," an effort announced last year to strengthen capital ratio and create long-term value for shareholders.
"The decision to refocus our commodities business is based on our identification of more attractive ways to deploy our capital and balance sheet resources," said Colin Fan, co-head of corporate banking and securities at Deutsche Bank. "This move responds to industry-wide regulatory change and will also reduce the complexity of our business."
The financial derivatives and precious metals businesses will be integrated into Deutsche Bank's fixed income and currencies platform to take advantage of existing synergies, the company said.
The announcement follows GDF Suez Energy North America’s shutting down its Houston-based speculative natural gas and power trading operations (see Daily GPI,Nov. 25). In June, Oneok shut down its natural gas marketing business in a nod to the reality of flattened basis spreads and the more challenging gas trading environment (see Daily GPI,June 13).
JPMorgan Chase & Co. and Hess Corp. have also recently announced their exits from gas marketing for various reasons (see Daily GPI,July 31;July 29).
Deutsche Bank's gas commodities business was ranked No. 41 among marketers by volume of natural gas bought and sold in 2012, according to an analysis by Natural Gas Intelligence of 2012 Form 552 buyer and seller filings with the Federal Energy Regulatory Commission (see Daily GPI, June 4). Deutsche Bank entered the U.S. natural gas trading and risk management business in 2004 (see Daily GPI,Feb. 25, 2004).