Deutsche Bank AG fired 10 to 12 European power and natural gas traders in London as it cuts staff trading physical commodities, two people with knowledge of the matter said.
There are at least two traders still unwinding positions as Europe’s biggest lender is reducing trading in physical energy markets, said the people, who asked for anonymity because the information is private. Nick Bone, a company spokesman in London, declined to comment when reached yesterday by phone.
Deutsche Bank, based in Frankfurt, follows JPMorgan Chase & Co. and Bank of America Corp. in shutting some units trading commodities because of tighter regulation in Europe and the U.S. after the financial crisis. Deutsche Bank has also made cuts among its U.S. gas and power traders, a person briefed on the matter said in December.
“Liquidity in the European gas and power markets should not be affected immensely,” Gary Hornby, an analyst at Inenco Group Ltd. in Lytham St. Annes, England, said today by e-mail. “If more banks decide to go down this route, liquidity could be affected in the future.”
The London-based traders at Deutsche Bank left in early December, the people said. The company is still offering commodity derivatives and clearing services from Frankfurt, according to a leaflet available at its stand at a conference in Essen, Germany, on Feb. 6.
The bank posted a fourth-quarter loss of 2.17 billion euros ($2.9 billion), compared with a 147 million-euro profit a year earlier, according to a Jan. 31 earnings statement. Quarterly revenues from commodities declined due to “reduced client activity,” it said in the statement.
Deutsche Bank announced in July plans to reduce headcount by 1,900, including 1,500 positions in corporate banking and securities, which energy falls under. The job cuts are expected to save 350 million euros.
Deutsche Bank last month named Louise Kitchen and Richard Jefferson as co-heads of commodities. Both are based in London and are replacing David Silbert. The bank has been trading European power and gas markets since at least 2003.
Barclays Plc suspended research in agricultural commodities in January and withdrew on Nov. 22 from floor trading on the London Metal Exchange, the world’s biggest metals bourse, to cut costs. The U.K.’s second-largest lender lost at least 11 European gas and power traders in the sixteen months through July reflecting bonus caps, limits on the amount of money traders can risk and shrinking revenue from the division that includes commodities.
Power prices in Germany, Europe’s biggest market, slumped to a record this month and volatility for the benchmark contract fell to a nine-year low in December. German power for next-year slumped to 40.20 euros a megawatt-hour on Feb. 1, the lowest since 2005, according to prices from the European Energy Exchange AG on Bloomberg. The contract closed today at 42.25 euros.
EON SE, Germany’s biggest utility, revised its earnings target last month as the slide in power prices are cutting profits made from selling electricity generated from natural gas. Commodities stagnated in 2012, with the Standard & Poor’s GSCI gauge of 24 raw materials rising 0.3 percent, compared with a 2.1 percent gain in 2011 and a 20 percent advance in 2010.
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