Top banks are reinforcing their metals divisions to cash in on the volatility that’s lifted trading profits over the past three years.
Russia’s invasion of Ukraine and the Federal Reserve’s aggressive rate hikes have extended the wild swings in metals markets. Copper, gold and aluminum have all surged to records, before plummeting in the face of tighter monetary policy.The biggest banks are set for a bumper year in commodities, as the war in Ukraine whipsaws raw materials prices. That follows a sluggish decade during which many lenders scaled back or exited metals trading.
Banks’ base metals earnings have climbed 25% to 30% this year, putting them on track for the best performance since the global financial crisis, according to Michael Turner, co-head of Coalition Greenwich. “Increased spreads, volatility and healthy flows have boosted bank revenues with a number looking to reinvest in the business,” he said.
JPMorgan has in recent months cut back its financing to Chinese metals firms, Bloomberg has reported. Moreover, the reputation of the bank’s industry-leading precious metals division took a hit this year after its former managing director was found guilty of spoofing. Morgan Stanley has added to its precious metals desk, recruiting Patrick Hayes from Wells Fargo & Co. last month, according to people familiar with the matter. It also added Peter Smith, a physical business specialist who spent decades at JPMorgan. By contrast, Morgan Stanley recently lost Ryan McCartney, its base metals trading head, to hedge fund Squarepoint Capital.
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