* Keeps other commodity businesses during major shake-up
* To continue index-linked agricultural investment
* Takes decision for "reputational reasons"
By Eric Onstad
LONDON, Feb 12 Barclays is halting
agricultural trading with hedge funds in a move to burnish its
reputation amid a major overhaul, but will still market
index-linked investment products in the sector.
The British bank is among several financial institutions to
have come under fire for speculating on grain and other
agriculture products, which critics say has pushed up food
prices and fuelled unrest in some poor countries.
Chief Executive Antony Jenkins told a news conference on
Tuesday the bank was exiting speculative trading in softs and
agriculture due to "reputational reasons", but was sticking with
the overall commodities sector.
A source close to the situation later clarified that the
bank was only stopping softs and agricultural trading with hedge
"We are not stopping trading in agriculture commodities or
softs. We're going to continue to provide a service to our
corporate... clients, what we're doing is we're stopping trading
with hedge funds," said the source, who declined to be
Barclays has a strong business in derivatives linked to
commodity indices, including subsectors ranging from metals to
agriculture, and this business would continue, the source added.
Although Barclays is one of the top five banks in
commodities - which together are estimated to control about 70
percent of the commodities trading pot - agricultural trading
has not been a major area for it.
One trader who specialised in agriculture departed Barclays
last week during the reorganisation, an industry source said.
The British bank along with Deutsche Bank and
J.P. Morgan built up commodities in the past decade to
challenge established veterans Goldman Sachs and Morgan
The move in commodities is part of a wider shake-up in which
the bank is shedding at least 3,700 jobs and pruning its
investment bank, aiming to cut 1.7 billion pounds ($2.7 billion)
in annual costs and raise standards after a series of scandals.
Germany's Commerzbank has restricted investments
in agricultural products, but other banks have been slower to
curb activity despite lobbying by groups such as the World
Deutsche Bank last month reversed a moratorium on
trading in agricultural derivatives, saying there was no
evidence that such activity boosted food prices.
Jenkins did not give any further details of changes within
the bank's commodity business, but a presentation on the bank's
website said the restructuring has largely been completed.
In November, Barclays quit open outcry trading at the London
Metal Exchange, downgrading its membership at the world's
biggest market for industrial metals to cut costs.
At the time, the bank said it remained "deeply committed to
the base metals market" and a source close to the bank said the
vast majority of its metals trading already flowed through the
bank's own electronic trading platform, BARX.
Last May, Barclays lost its commodities trading chief Roger
Jones to Swiss trader Mercuria, one of the biggest in a series
of moves by commodities traders from banks to less-regulated
Barclays said in its results statement on Tuesday that Fixed
Income, Currency and Commodities revenue jumped 50 percent
year-on-year in the fourth quarter and 17 percent last year, but
like other banks it does not break out commodity turnover.
In the fourth quarter, commodities revenue at top U.S. banks
tumbled by a third as tougher regulation curbed activity amid
lacklustre markets and sluggish demand for hedging, consultancy