By JENNY ANDERSON
THE NEW YORK TIMES
Investment banks, which rushed into the new territory of physical commodities starting at the turn of the century, are now beating a retreat.
Banks are leaving the business in the face of increasing regulatory scrutiny and falling profits. Competition and a relative calm in commodities prices have also pinched profits.
Wall Street firms often race into and out of businesses like commodities based on the profit they can make. While Goldman Sachs got into commodities in 1981, with the acquisition of the commodities trading firm J. Aron & Company, many banks, including Barclays, invested aggressively to build their commodities business only to dismantle it a few years later and start again.
Jeffrey M. Christian, managing partner at the CPM Group, a commodities research consulting firm, said that he left banking because of the yo-yo nature of the business: Build in good times, destroy in bad times, start again.
âYou ask bank management, âWill you regret this decision to exit the business?â And the answer is âNo, we wonât, because we will throw it away now and we will save quite a bit of money and we can always rebuild it because traders are replaceable.â â
http://dealbook.nytimes.com/2014/04/21/barclays-poised-to-announce-exit-from-commodities/
THE NEW YORK TIMES
Investment banks, which rushed into the new territory of physical commodities starting at the turn of the century, are now beating a retreat.
Banks are leaving the business in the face of increasing regulatory scrutiny and falling profits. Competition and a relative calm in commodities prices have also pinched profits.
Wall Street firms often race into and out of businesses like commodities based on the profit they can make. While Goldman Sachs got into commodities in 1981, with the acquisition of the commodities trading firm J. Aron & Company, many banks, including Barclays, invested aggressively to build their commodities business only to dismantle it a few years later and start again.
Jeffrey M. Christian, managing partner at the CPM Group, a commodities research consulting firm, said that he left banking because of the yo-yo nature of the business: Build in good times, destroy in bad times, start again.
âYou ask bank management, âWill you regret this decision to exit the business?â And the answer is âNo, we wonât, because we will throw it away now and we will save quite a bit of money and we can always rebuild it because traders are replaceable.â â
http://dealbook.nytimes.com/2014/04/21/barclays-poised-to-announce-exit-from-commodities/
