MOVES-Citi hires ex-Deutsche iron ore trader, bets on bulks volatility

Tue Jul 29, 2014 12:32pm EDT

(Adds details in second paragraph on nature of Citi's services, writes through)

By Maytaal Angel and Silvia Antonioli

LONDON, July 29 (Reuters) - Citigroup Inc has hired a physical iron ore trader from Deutsche Bank AG to head its global bulk commodity sales team, as the U.S. bank looks to capitalise on some rivals quitting the sector and from increased market volatility.

Vlad Stoychev, who started at Citi on July 14, will be tasked with attracting iron ore and coal clients to the bank, in both the physical and financing business, a spokeswoman said, offering services such as logistics, financing and hedging.

The move comes as the likes of Credit Suisse, Deutsche Bank, Barclays and JPMorgan leave the business due to unprecedented regulatory scrutiny and diminished margins.

Citigroup's revenue from commodities transactions nearly doubled in the first quarter of 2014 year-on-year, reaching $224 million and just $43 million shy of its total commodities trading haul for all of 2013.

"Some banks are getting into iron ore because volatility is high in bulk commodities, so there's more clients, more opportunities for prop (proprietary) traders outside banks, and that gives banks some client flow business to execute," said an industry source.

Prices for iron ore .IO62-CNI=SI have dropped around 30 percent this year, while thermal coal prices have either risen or fallen by between 5 and 10 percent almost every month this year, offering increased profit potential for banks.

At the same time, the iron ore derivatives market is continuing to mature, meaning banks can offer more services to both physical and financial clients looking for exposure to the world's no. 2 traded commodity after oil.

Singapore Exchange (SGX), which clears more than 90 percent of globally traded iron ore swaps, said the total volume of trade in iron ore swaps, futures and options reached 205.4 million tonnes from January to May, up 113 percent from a year earlier.

Citi scaled back its exposure to energy, metals and agricultural markets following the 2008 financial crisis, but has been rebuilding its commodities operations over the last year.

It joins Goldman Sachs and Morgan Stanley as the last of the big banks standing in commodities, but faces competition from smaller rivals like BTG Pactual, Standard Bank , Macquarie and ANZ. (Editing by David Evans and David Holmes)

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