Goldman Sachs further cuts commodity trading

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LONDON (Reuters) – Goldman Sachs Group Inc, once one of the most active banks in commodity trading, has cut 10 jobs to further reduce its global commodities trading division amid rising costs and lower profits.

FILE PHOTO: The Goldman Sachs Company logo is seen in the company’s space on the floors of the New York Stock Exchange (NYSE) in New York, United States, April 17, 2018. REUTERS / Brendan McDermid

Three sources familiar with the matter said Thursday that the cuts were announced this week following an annual review of the workforce in all divisions and regions. Goldman Sachs declined to comment.

The commodities trading business was once one of Goldman’s largest and busiest units and a major driver of Wall Street bank profits until tighter regulation reduced risk that she could take on exclusive bets.

The cuts accelerated as competition with trading houses and oil majors increased and profits fell.

Three of the 10 people made redundant were in managerial or general manager positions in the company’s commodities unit, a source familiar with the cuts said.

The cuts are global and will involve the merger of the commodities unit’s metals trading desks, the source said.

Banks do not disclose their commodity revenues, but financial analyst firm Coalition estimates the top 12 banks generated commodity trading revenues of less than $ 4 billion in 2018, up from nearly $ 16 billion. in 2008.

Income from fixed income, currencies and commodities of all major investment banks fell to their lowest levels since the financial crisis of the last quarter of 2018, data from the Coalition, the trade showed. of oil undergoing significant declines throughout the year.

Goldman has launched a multi-month review of the commodities division to assess its profitability and use of capital.

The review began under the leadership of former Goldman managing director Lloyd Blankfein, who was himself a commodities trader and was seen as a strong supporter of the division, but ended under the leadership of the new chief, David Solomon, who never traded commodities.

The review showed the company was using too much capital for too little profit, the Wall Street Journal reported in February, citing people familiar with the matter.

The Journal said Goldman was discussing the withdrawal from physical trade in iron ore, platinum and other metals.

One of the sources told Reuters on Friday that Goldman was not pulling out of any commodities business and would remain a big and important part of the bank’s securities division.

Reporting by Dmitry Zhdannikov and Sinead Cruise, additional reporting by Devika Krishna Kumar in New York; Editing by Edmund Blair, Elaine Hardcastle and Jonathan Oatis

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