By Jeanine Prezioso
NEW YORK Feb 25 Britain's Barclays Plc
said on Tuesday it has closed its power trading desks in London
and New York, joining a string of global investment banks that
are paring down their commodity market activities as increased
Barclays, a top-five banking player in commodities trading
which is in the process of shrinking its investment banking
activities, said its "core commodities franchise continues to
operate business as usual".
"We will continue to actively manage our existing books to
minimize any impact on our clients' business," the bank said in
Like other large investment banks, Barclays faces regulatory
pressure to shore up capital and curb proprietary trading, which
has eaten into profits and driven top trading talent to
privately-held commodity trading houses.
Barclays has reduced its activity in the power trading
sector in recent years. It scaled back its European energy desk
in 2013 when its head of energy research left the company.
"It isn't a surprise. This has been coming our way for a
while as the power desk has been getting smaller for some time
now," said one source with the bank's energy business.
"With all the other banks exiting, it was almost a surprise
that we held on so long."
The exodus continued at the start of 2014, with James
Grove, the Barclays' head of commodities in Asia, leaving the
bank in January. London-based managing director for power
trading Patrick Barouki also left during the latest rounds of
departures, sources have said.
The 10 or so employees on London and New York desks will
remain with Barclays for the time being, a source familiar with
the bank said.
Barclays has cut its commodities trading staff by more than
20 percent, sharper reductions than those seen in its fixed
income, currencies or equities trading.
It plans to shed hundreds more jobs in its investment
banking division this year.
Five months ago, the U.S. Federal Energy Regulatory
Commission (FERC) filed a lawsuit in a California federal court
to recover some $435 million from Barclays for alleged power
market manipulation, a charge which the bank disputes.
A Barclays spokesman said on Tuesday its decision to exit
the power market had nothing to do with FERC's action.
He referred to an earlier statement from the bank that said
it believes its "trading was legitimate and in compliance with
ROUGH RIDE FOR BANKS
Moves by investment banks to cut their commodities
businesses in the last two years have shrunk the market's size
and left less liquidity to lure a broad base of investors.
Total global commodity assets under management fell to $319
billion in December 2013 from $332 billion in November 2013,
Barclays Capital said in a research note earlier this month.
Revenue from commodities for top banks fell to $4.5 billion
last year from $5.5 billion the previous year, London-based
financial industry analytics firm Coalition said in a report
earlier this month.
Deutsche Bank started reducing its exposure by
closing down European power and gas desks at the end of 2012 and
a year later decided to fully shut down commodities trading.
Morgan Stanley sold the majority of its physical oil
trading business to Russia's state-backed energy major Rosneft.
The bank, along with Citigroup, will remain in power
and gas markets though the exodus of others means greater
dominance by utilities and trading houses and less appeal for
At least one large commodity merchant lamented the loss of
banks in the natural resources chain, even as the merchants pick
up some of their market share.
The head of the world largest oil trader Vitol, Ian Taylor,
said this month he regretted banks were leaving the sector as
they were the necessary providers of liquidity in the forward
market for hedging purposes.
"I don't think we will lose them all. Goldman Sachs said
they gonna fight on and I hope they do," he said.