Bank Strengthens Metals Trading Desk After Wild Year for Markets | Techy Kings


(Bloomberg) — Major banks are strengthening their metals divisions to offset volatility that has lifted trading profits over the past three years.

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Russia’s invasion of Ukraine and the Federal Reserve’s aggressive rate hikes have prolonged wild swings in the metals market. Copper, gold and aluminum have all surged to records, before plunging in the face of tighter monetary policy.

The biggest banks are set for a buoyant year in commodities, as the war in Ukraine drives down raw material prices. That followed a sluggish decade in which many lenders scaled back or exited the metals trade.

Bank of America Corp. and Morgan Stanley have been hiring for their metals division, while Deutsche Bank AG is weighing a return to a business it abandoned just under a decade ago.

The bank’s base metals earnings have risen 25% to 30% this year, putting them on track for their best performance since the global financial crisis, according to Michael Turner, co-head of Coalition Greenwich. “Increased spreads, volatility and healthy flows have increased the bank’s income with some people wanting to reinvest in the business,” he said.

The hiring comes as JPMorgan Chase & Co., the longtime market leader, has been reviewing its exposure to the commodity after March’s brief nickel squeeze, in which it was the main counterparty to Tsingshan Holding Group Co., the world’s largest producer of the metal at the center of crisis.

JPMorgan in recent months has reduced its funding of Chinese metals firms, Bloomberg reported. Additionally, the reputation of the bank’s industry-leading precious metals division took a hit this year after its former managing director was found guilty of fraud.

As JPMorgan pulls back in some areas, other banks step up. Bank of America recently hired Ben Green, a base metals veteran, from Macquarie Group Ltd. The lender’s commodities division typically focuses on energy versus metals such as copper, aluminum and zinc.

Morgan Stanley has added to its precious metals desk, recruiting Patrick Hayes from Wells Fargo & Co. last month, according to people familiar with the matter. It also added Peter Smith, a physical business expert who spent decades at JPMorgan. In contrast, Morgan Stanley recently lost Ryan McCartney, its head of base metals trading, to hedge fund Squarepoint Capital.

Deutsche Bank has been exploring whether to hire someone to revive its base metal desk, according to people familiar with the matter and job ads seen by Bloomberg. No decision has been made yet, said the people, asking not to be named because the matter is confidential.

JPMorgan is by far the biggest bank in metals trading, with Goldman Sachs Group Inc., Citigroup Inc. and Macquarie also played a big role. HSBC Holdings Plc is also a major player in the precious metals market.

Deutsche Bank, Bank of America and Morgan Stanley declined to comment.

–With help from Yvonne Yue Li, Joe Deaux, Steven Arons and Sing Yee Ong.

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