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Deutsche Bank Exits Commodity Trading, Fires 200

Tyler Durden's picture





 

It is amazing what a few short months of intense regulatory scrutiny, a few multi-billion fines, and the occasional janitorial arrest can do to fraudulent bank business lines. First, recall that as we showed a week ago, and as we have been saying for the past five years, banks were recently "found" to manipulate, in a criminal sense, pretty much everything. Then recall that yesterday the European Union lobbed the biggest monetary fine in history against bank cartel behavior, with the guiltiest party, at least based on monetary amounts, being Deutsche Bank. So now that outsized profits as a result of illegal "trading" become virtually impossible to procure, what is a self-respectable criminal enterprise to do? Why shut down all formerly infringing lines of business of course. Which is what Deutsche Bank just did, which announced a few hours ago that it has pulled the plug on its global commodities trading business, cutting 200 jobs in the process (200 jobs that will certainly be able to find a job in a jurisdiction where criminal trading behavior is still not as intensely scrutinized).

Germany's largest bank (whose total notional derivative exposure relative to German GDP has to be seen to be believed), which was one of the top-five financial players in commodities, will cease energy, agriculture, base metals, coal and iron ore trading, it said in a statement. What will DB keep? Drumroll: only precious metals alongside a limited number of financial derivatives traders. Because one always need to be able to sell "paper-backed" gold derivatives in order to keep the price of gold low while the NY Fed keeps procuring the hundreds of tons of physical gold demanded by the Bundesbank. That, and of course, because gold is the only product in the history of banking to have never been manipulated.

Reuters has more:

The cuts are expected to largely fall on its main commodity desks in London and New York.

 

The move comes as the financial sector's role in commodity trading has been squeezed by lower margins, higher capital requirements, and growing political and regulatory scrutiny of the role of banks in the natural resources supply chain.

DB's justification for the shutdown is quite amusing:

"This move responds to industry-wide regulatory change and will also reduce the complexity of our business... The decision to refocus our commodities business is based on our identification of more attractive ways to deploy our capital and balance sheet resources," said Colin Fan, co-head of Corporate Banking & Securities at Deutsche Bank, in a statement.

Such as mortgage orgination? Just kidding. It's not as if anyone even pretends banks are anything more than just taxpayer-backed hedge funds.

Then again, Deutsche had figured out which way the wind blows as long as a year ago, when the head of global commodities trading David Silbert suddenly picked up and left:

Deutsche Bank was among the first financial firms to try and challenge the long dominance of Goldman Sachs and Morgan Stanley in commodities trading a decade ago, but suffered a series of ups and downs and personnel changes over the years, including the departure of global chief David Silbert a year ago.

 

Silbert's departure was the first sign that the bank was withdrawing from the one-time billion-dollar business, which had included a substantial U.S. and European power and gas book, a major market-making operation in oil options, and base metals trading.

 

"Silbert built up Deutsche Bank's commodity group to make it a top five contender in the space of five years and then left rather than pull down the house he built," said George Stein, managing director of New York-based recruiting firm Commodity Talent LLC.

 

"The destruction of the commodities business at Deutsche Bank is one more sign that the large global banks no longer see commodities as viable," Stein added.

As for everybody else...

The bank announced the decision to staff at a meeting shortly after lunch on Thursday, with around half the 200 traders affected clearing their desks and leaving immediately, according to a person familiar with the matter.

Supposedly these are the traders at high risk of being subpoenaed and with whom DB wants to cut ties as quickly as possible, so as to be able to claim full ignorance of all their actions (see: every other bank in history).

Finally, DB's loss is someone else's gain.

Not all banks are scaling back in the sector, however. London-headquartered Standard Chartered, which does a lot of its business in emerging markets, said this month it plans to double revenues from its commodities business in the next four years and plans to add 10-20 staff to its existing team of 100 in the next six months.

 

Global commodity merchants such as Vitol, Glencore and Mercuria, which are not as affected by growing regulation, are also looking to step into the vacuum left by the big U.S. and European financial heavyweights. Asian-Pacific and South American banks, including Australia's Macquarie and Sao Paulo-based BTG Pactual, are also expanding their commodities businesses.

Then again, since these far smaller and non-government backed entities will hardly have the balance sheet to suppress commodity prices either up or down, even as equities trade in Bernanke's lala land, commodities may soon become the only market with some semblance of normalcy.

 


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Thu, 12/05/2013 - 17:45 | Link to Comment NoDebt
NoDebt's picture

"even as equities trade in Bernanke's lala land, commodities may soon become the only market with some semblance of normalcy."

Not if Goldman's still doing it.  In fact, one less meaningful competitor would strengthen their pimp hand, would it not?

Thu, 12/05/2013 - 17:56 | Link to Comment negative rates
negative rates's picture

Everywhere but the palmeto state.

Thu, 12/05/2013 - 18:36 | Link to Comment nuclearsquid
nuclearsquid's picture

might take a hike downtown tonight just to revel in the tears

Thu, 12/05/2013 - 18:20 | Link to Comment slaughterer
slaughterer's picture

Those 200 people just fired from commodities trading at DB already have new jobs at BIS, and the Fed.  

Thu, 12/05/2013 - 18:27 | Link to Comment Xibalba
Xibalba's picture

#JPMrecruits

Thu, 12/05/2013 - 18:38 | Link to Comment nuclearsquid
nuclearsquid's picture

#UBSrecruits

fixed it for you

Thu, 12/05/2013 - 20:05 | Link to Comment artless
artless's picture

Were these folks NYC based? Forgive my ignorance. But if they are then...

 

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA oh and haha.

 

Who will do the next round of firing?

Thu, 12/05/2013 - 19:34 | Link to Comment Exponere Mendaces
Exponere Mendaces's picture

Finally there are layoffs at the upper tiers. Enjoy your time off, psychopathic bastards.

Thu, 12/05/2013 - 17:46 | Link to Comment falak pema
falak pema's picture

...It is amazing what a few short months of intense regulatory scrutiny, a few multi-billion fines, and the occasional janitorial arrest can do to fraudulent bank business lines...

At last some words of sanity in a sea of insanity.

Thu, 12/05/2013 - 19:23 | Link to Comment seek
seek's picture

This is for show. There's no real regulation going on and the fraud party continues. What worries me is the sleight of hand, while we're looking at this, what's going on where we're not paying attention?

Thu, 12/05/2013 - 20:21 | Link to Comment artless
artless's picture

Agreed in part. It's about as effective as a traffic cop on valium (Stoooooooop, uh) and it is always interesting when we get the "fines" and such seeing as that is just one criminal entity handing over money to the other criminal entity otherwise known as GOVERNMENT while those actually harmed by the activity get shit. Just atke a look at the $13 billion The JP Morgue was "fined" and how that breaks down. Then notice their written in future tax write off so it's like the money is just moving back and forth.

Here's the deal. The 200 or so fucktards (and I say that with all due respect) that were employed and now are not-some of them are fuct. Meanwhile the shitbags who set the course of action (let's call that person The Jamie Dimon of Deutche Bank) just rolls on, and most likely will continue to rake it in, and eventually jump ship or be sent out with a gigantic golden parachute. And I reckon there are several upper management types whose names and faces we will never know that will do the same.

One of these days some guy in a position like these 200 folks is gonna do an Ed Snowden on their overseers. Someone must be bright enough to back themselves up with a little insurance and eventually get sick of all this shit to finally let it all loose.

Thu, 12/05/2013 - 20:46 | Link to Comment Crash Overide
Crash Overide's picture

Wouldn't it be something if they actually arrested someone for fraud?

Thu, 12/05/2013 - 17:50 | Link to Comment U4 eee aaa
U4 eee aaa's picture

Good riddance!

Hey, is that a bit of sunshine I see there peeking out from the clouds?

Thu, 12/05/2013 - 17:58 | Link to Comment ChaosEquilibrium
ChaosEquilibrium's picture

DB is NOT exiting on their own volition!!!!

 

Trouble in Germany is brewing!!!

Thu, 12/05/2013 - 18:12 | Link to Comment virgilcaine
virgilcaine's picture

Stawks will be next, they lag Crb by about a Yr.

Bull Mkt  2001-2011.

Thu, 12/05/2013 - 18:09 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

What???  You want us to actually follow laws?

Fuck this, we don't have to follow laws in our other endeavors.

We are out of here!!!

Thu, 12/05/2013 - 18:13 | Link to Comment NOTW777
NOTW777's picture

but how will they manipulate gold and silver? they are falling like flies. will JP and GS have to do all the work?  this could be a crisis - no

Thu, 12/05/2013 - 18:22 | Link to Comment NotApplicable
NotApplicable's picture

You should start reading the articles, and stop assuming that gold and silver are commodities.

Everyone knows that they're really monetary tools. *wink*, *wink*, *nudge*, *nudge*

yaknowwatImean?

Thu, 12/05/2013 - 18:16 | Link to Comment Rainman
Rainman's picture

Too bad they still can't find a buyer for their other shitty-ass money-losing casino.... in Vegas, baby !

http://www.reviewjournal.com/business/casinos-gaming/cosmopolitan-las-vegas-reports-252-million-quarterly-loss

Thu, 12/05/2013 - 18:17 | Link to Comment Quant Jockey
Quant Jockey's picture

Merry Christmas, bitchez!

Thu, 12/05/2013 - 18:22 | Link to Comment AGoldhamster
AGoldhamster's picture

They'll just shift their assets and traders elsewhere. And start in an even more unregulated and profitabler way.

Let me guess - Asia is a pretty good place for a restart.

Not?

What a show!

Thu, 12/05/2013 - 18:30 | Link to Comment virgilcaine
virgilcaine's picture

Just buy Bwld, combines a commodity chicken wings in a stawk! BTATH.  148.00 "Ain't no thing but a chicken wing".

Thu, 12/05/2013 - 18:27 | Link to Comment assistedliving
assistedliving's picture

just great.  from regulated criminals to unregulated thiefs.  party on

Thu, 12/05/2013 - 18:40 | Link to Comment nope-1004
nope-1004's picture

"global commodities trading business"

 

global commodities fraud enterprise.  FIFY.


Thu, 12/05/2013 - 18:47 | Link to Comment Papasmurf
Papasmurf's picture

Subsidiary closed, records burned, hard drives erased,  there is nothing to see here, move along.

Thu, 12/05/2013 - 18:50 | Link to Comment Son of Captain Nemo
Son of Captain Nemo's picture

Is this code speak that the German CB won't be asking for it's Gold either now, or in the next 7 years?...

Thu, 12/05/2013 - 19:07 | Link to Comment Stanley Lord
Stanley Lord's picture

Goldman is next to pay the fines, 2014 will be a bad year at GS.

Thu, 12/05/2013 - 20:24 | Link to Comment artless
artless's picture

Until Goldman shares the same space in the dustbin of history with Enron I couldn't give a shit about any fines they pay in 2014, 2015, 2016 or frankly ever.

Orange jump suits. Frog marched off to jail. In front of all the cameras.

And yes, I know that's NEVER going to happen.

Thu, 12/05/2013 - 19:09 | Link to Comment alfred b.
alfred b.'s picture

 

,,,,,and yet no handcuffs!!

 

Thu, 12/05/2013 - 19:27 | Link to Comment WallowaMountainMan
WallowaMountainMan's picture

"The bank announced the decision to staff at a meeting shortly after lunch on Thursday, with around half the 200 traders affected clearing their desks and leaving immediately, according to a person familiar with the matter."

 

 

bitcoin, here they come...

 

:)

Thu, 12/05/2013 - 19:39 | Link to Comment williambanzai7
williambanzai7's picture

Suddenly they can all make more money mismanaging all that newly minted QE wealth for their high networth customers.

Thu, 12/05/2013 - 20:18 | Link to Comment Iam Yue2
Iam Yue2's picture

GIGO

Thu, 12/05/2013 - 20:34 | Link to Comment jonjon831983
jonjon831983's picture

Now opening: DB BitCoin Trading desk.

Fri, 12/06/2013 - 00:47 | Link to Comment Vice
Vice's picture

Fuck yeah! I grow tired of countless bullshit monkey hammers of ags at the close! Should have seen it during the shutdown, it was pathetic. Free markets my ass. 

Game on bitchez!

Fri, 12/06/2013 - 01:28 | Link to Comment Againstthelie
Againstthelie's picture

Bernankes lala land!

Hilarious. ZH you are the best.

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