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BANKS: Citi still sees opportunity in more regulated, less volatile commodities markets

August 08, 2014 - 15:52 GMT Location: London

KEYWORDS: Citi , José Cogolludo , commodities banking

Citi is confident that it can run a lucrative commodities business in less volatile, more heavily regulated markets, the bank’s head of commodities sales told Metal Bulletin.

Increasing compliance costs and low volatility have together driven margins in commodities banking progressively lower over the past few years and changed the landscape of the sector markedly, Citi's José Cogolludo said in an interview. With costs rising and order volumes falling, running a vanilla agency-style commodities brokerage is not an attractive proposition in the post-crisis, post-supercycle environment, he said. In addition, new regulations are prohibiting banks from trying to boost profits by trading commodities for their accounts. In any event, this is becoming less rewarding as commodity prices chop about in narrower ranges, he said. However, there...

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