BNP Paribas SA is shuttering its U.S. commodities derivatives desk, according to people familiar with the matter, the second trading unit to be wound down within days as France’s largest bank seeks to protect profitability.
The closing of the business, which had 16 people and traded energy, metals and some agricultural products, dovetails with an earlier decision by BNP to stop financing shale and oil sands projects. But the timing -- days after Bloomberg reported the bank is said to be closing its proprietary trading arm Opera Trading Capital -- suggests broader adjustments at the investment bank, analysts said.
“The bank seems to be adopting enhanced discipline on costs and profitability at its markets activities,” said Jean-Pierre Lambert, an analyst at Keefe, Bruyette & Woods in London who has an outperform rating on BNP Paribas shares.
BNP declined to comment.
Revenue at BNP’s key trading business fell almost 10 per cent in the first nine months of last year, casting doubt on Chief Executive Officer Jean-Laurent Bonnafe’s goal to restore growth, and a challenging market in the final quarter isn’t helping the industry. Citigroup Inc. on Monday reported a 21 per cent slump in trading fixed income, currency and commodities. JPMorgan Chase & Co. followed Tuesday, saying “challenging market conditions” weighed on its trading business.
BNP was little changed at 4:08 p.m. in Paris trading, erasing earlier gains. The stock has lost 38 percent over the past 12 months.
Opera, a unit that makes risky bets with the bank’s capital, is being shuttered after it struggled to make a profit last year amid market volatility, a person familiar with the matter said last week. The business is funded with 600 million euros ($686 million) of capital, according to accounts filed last year. Executives want to close it so they can reallocate resources to businesses that focus on clients, one of the people said.
At the commodities unit, some staff will be retained to help manage and unwind existing positions in New York, the people said, asking not to be identified because the closure hasn’t been announced publicly. Some sales staff will be moved to cover foreign exchange markets, one of the people said, while some traders will be given the opportunity to move overseas. There will still be sales people in New York, who will route customer orders to BNP’s commodities desks in London and Singapore, one of the people said.
The move is part of a broader push by Wall Street and other financial firms to scale back commodities. Barclays Plc, Deutsche Bank AG and Credit Suisse Group AG have exited energy trading, while in recent years severe losses forced firms such as Jamison Capital Partners and Brenham Capital Management to shut down. BNP announced in late 2017 that it would end business with companies whose principal business activity is tied to oil and natural gas from shale or oil sands regions.