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April 23, 2014

Barclays joins retreat from commodities as new rules bite

“(Reuters) – Barclays (BARC.L) will quit most of its commodities trading businesses, joining a broader retreat by banks as profits tumble in the face of tougher regulation.”

“The British bank’s exit means three of the top five banks in commodities have significantly reduced or shuttered their natural resource trading arms since last summer, with profits hit by regulatory demands for lenders to hold more capital to shield them against any problems.”

“Barclays said it would exit most of its base metals, energy and agricultural trading but will continue in precious metals, some oil and gas derivatives products and index products. The smaller business will be based on electronic execution, it said.”

“The bank did not say how many jobs would be lost from its team of 160 commodities staff across trading, sales and research.”

“Barclays’ commodities arm was built up when Bob Diamond was growing his investment bank to challenge the big U.S. banks, especially Goldman Sachs (GS.N) and Morgan Stanley (MS.N), who pioneered commodity trading on Wall Street 30 years ago.”

“Goldman and Morgan Stanley remain the two largest banks in commodities and several banks have given up the chase.”

“JPMorgan Chase & Co (JPM.N) is selling its vast physical commodities business to Swiss-based independent trader Mercuria for $3.5 billion, while Deutsche Bank (DBKGn.DE) announced late last year it was closing its oil, grains and industrial metals business.”

“Commodities trading revenue for 10 of the world’s biggest banks fell to $4.5 billion last year, down from more than $14 billion in 2008, according to estimates from analytics firm Coalition.”

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Read full Bloomberg article here.

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