Deutsche Bank to Add Coal, Gas, Shipping in Commodity Expansion

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Wednesday, 01 April 2009

Deutsche Bank AG, after quadrupling revenue from commodities in two years, plans to add coal, European natural-gas and shipping to its business, anticipating a rebound in demand and prices. Germany’s biggest bank expanded its commodities team by about 10 percent this year, David Silbert, global head of the unit, said in a March 25 interview in London. He declined to provide specific figures.
Deutsche Bank’s growth contrasts with that of Zurich-based UBS AG, which agreed to sell its industrial metals, oil and U.S. power and gas assets to Barclays Plc in January. The Reuters/ Jefferies CRB Index of 19 commodities dropped 6.3 percent in 2009 after falling 36 percent last year, the gauge’s worst performance in a half century.
“With hope of an economic rebound, crude, base metals prices are going to be higher than now,” said Silbert, 39, without giving a timeframe. Both industries have insufficient capacity to handle any acceleration in demand, he said.
Silbert took over Deutsche Bank’s commodities division in 2007, arriving from Merrill Lynch & Co. The German bank had commodities revenue of about 200 million euros ($263 million) in 2006, Anshu Jain, head of global markets, said in May 2007.
Deutsche Bank added four people in metals in the last several weeks, Silbert said. Traders Paul Wilkes and Andrew Baldock came from UBS, Scott Marsh from Morgan Stanley and strategist John DeAngelis from Fortress Investment Group LLC.
The bank handles commodities derivatives and physical supplies of industrial and precious metals. Deutsche Bank will seek to arrange trade finance in coal and its other new services, said Silbert, a former trader at Texaco Natural Gas.
Raw-Materials Trader
The bank formed a venture this month with Stemcor Holdings Ltd., a closely held steel and raw-materials trader. Stemcor has clients who want to hedge their positions, and those are customers who would not normally approach a bank directly to carry out the transactions, Silbert said. A similar partnership may be started in oil, he said.
Deutsche Bank this month bought a stake in London Dry Bulk Ltd., an iron-ore broker and coal and cement trader.
Deutsche Bank’s value at risk in commodities, a measure of how much the firm estimates it could lose in a single day, rose to 13.5 million euros at the end of 2008, compared with 8.7 million euros a year earlier, according to the bank’s annual report. Goldman Sachs Group Inc.’s value at risk in commodities was $44 million last year.
Deutsche Bank posted a record 4.8 billion-euro loss in the fourth quarter. It cut 900 jobs at its global markets unit, shut down credit proprietary trading and sold assets.
Source: Bloomberg