Banks trim energy trading, but majors staff up
Banks are scaling back trading in the energy markets but natural gas producers and private trading houses are reported to be staffing up, providing laid-off traders with hope.
Crédit Agricole, the French bank that ventured into energy trading from its core farming market, is now abandoning commodities trading, a spokeswoman confirmed on Friday.
This follows earlier redundancies from Citigroup across its fixed income, currencies and commodities group, and Société Générale scaling back its US trading presence, according to sources.
Banks are slimming down their proprietary commodity trading in the wake of higher costs of credit and higher salaries, making it harder to break even. Instead, some of the key energy companies could step in to hire.
"There has been a shift away from banks toward the resource owners - the oil and natural gas majors," John O'Dwyer, commodities recruitment consultant and ex-gas trader from eg.1 said.
Banks hired aggressively and built teams during the boom years of trending commodity markets and cheap credit, O'Dwyer said.
"Banks are keeping very lean businesses now. They have suffered a double hit from higher cost of credit and higher salaries," he said. Caps on bonuses mean that base salaries are rising.
"At the same time, markets in 2010 and 2011 have been increasingly difficult to trade without a strong trend to follow," O'Dwyer said.
The price effect of the Japanese earthquake hurt a lot of trading books and eroded management's confidence in a return to 2006-2009 boom years.
But the good news for commodity traders is that major producers and private trading houses are either already hiring, or planning to start doing so in the new year, although O'Dwyer was unwilling to name specific companies. And private trading houses will continue to hire top proprietary trading talent, he added. AST/IS
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01 Sep 2014 21:24