After several years of upheaval in the over-the-counter commodity derivatives markets, driven largely by regulatory change, the dust has settled. It is now possible to take stock of the winners and losers.
Citi is undoubtedly among the winners. Unlike rivals such as Barclays, Credit Suisse and Deutsche Bank, which have shut down or greatly scaled back their commodities businesses in recent years, Citi has stepped up its presence in the markets.
Last year it earned $750 million from commodities transactions, up 27% from 2014, according to its annual earnings report. Citi also cracked the top three banks by global commodity revenue, tying for second place with JP Morgan, according to London-based analytics firm Coalition.
Notably, Citi continues to execute long-dated transactions and complex structured deals for which few other banks have the appetite. For that, it wins the coveted Derivatives house of the year award. It also picks up awards for precious metals and emissions, two areas in which it executed some of the biggest and most original deals in 2015.
Stuart Staley, the bank's London-based global head of commodities, says Citi's persistence in markets such as energy and metals gives it an edge with clients. "Our franchise covers a lot of clients – including corporates, sovereigns and investors – many of which have very significant commodity risk components in their underlying business," he says. "So the management of commodity risk is a key part of that multi-product platform and, in the past several years, it has been instrumental in helping us differentiate our offering with those clients."
Other banks that have bucked the trend and stuck to their commodities businesses in the past few years have also been recognised in this year's Energy Risk Awards.
Upstart Australian bank Macquarie seizes the Oil & products house of the year award, while veteran energy player Morgan Stanley takes Deal of the year for a complex, long-dated US wind-power intermediation transaction. Another stalwart of the commodity markets, BNP Paribas, wins top honours in base metals.
One of the most striking trends in OTC commodity markets of recent years has been the rise of nonbank dealers. That trend is reflected in this year's Energy Risk Awards, in which four nonbanks have won categories historically dominated by financial institutions.
These include BP, which wins Natural gas house of the year, and Engie Global Markets, the trading arm of Paris-based multinational utility Engie, which takes Electricity house of the year. Cargill Risk Management, the swap-dealer unit of US-based commodity trading giant Cargill, wins Agricultural commodities house of the year. Last but not least, Javelin Global Commodities – a London-based merchant firm started just one year ago by an ex-Goldman trader – takes coal house of the year.
The Energy Risk Awards are decided by the Risk.net editorial team following a lengthy vetting process in which our journalists examine each firm's accomplishments and speak to its clients and counterparties. The awards are not intended to honour the dealers with the greatest market share or revenues, but rather to highlight those firms that are most appreciated by their clients and most innovative in their deal-making, in the judgement of Risk.net.
Profiles of each winner may be found by clicking on the links below.
The week on Risk.net, September 8-14, 2018Receive this by email