July 29, 2014 / 3:57 PM / 3 years ago

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

(Adds MOVES tag in headline; also repeats to additional Reuters clients)

* Vlad Stoychev to head Citigroup global iron ore and coal sales

* Citi sees rivals fade, looks to cash in on bulks volatility

By Maytaal Angel and Silvia Antonioli

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

Vlad Stoychev, who started on July 14, will be tasked with attracting physical iron ore and coal clients to Citigroup, a spokeswoman for the bank told Reuters.

The move comes as commodity behemoths 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-over-year, coming in at $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 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 5-10 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.

Citigroup 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.

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

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