Oil loses lustre as banks cash in on cleaner commodities

LONDON: Investment banks are beefing up trading teams in markets such as gas, metals and carbon permits that are flourishing as businesses and economies become greener, according to recruitment consultants.
The shift in staffing at the world’s biggest investment banks comes at the expense of oil, which has fallen out of favour after being the most profitable and best-staffed commodities business for years.
Natural gas, which is considered a cleaner energy source than oil, and metals, which are essential components of batteries and for electrifying transportation systems, are now seen as a better bet, some headhunters said.
“As we move toward a decarbonised economy these businesses realise they need to be involved in electricity,” said Jonathan Funnell at recruiters Proco Commodities. “Oil (revenues) being so bad has brought this to the forefront.” The world’s 12 biggest investment banks earned a combined $2.5 billion from power, natural gas and metals last year, according to previously unpublished data. That’s more than five times the $450 million they made from oil.
Four headhunters specialising in commodities positions said hiring in the oil sector fell 20 per cent to 25 per cent over the last 18 months or so. Hiring of power and gas specialists, meanwhile, rose about 20 per cent and there was an increase in metals desks of 5 per cent to 10 per cent.
Investment banks regularly chop and change teams depending on which markets are the most profitable and some consultants say the latest shift is just the result of a poor performance in oil over the last two years.
In some cases, investment banks have just been rebuilding power and gas teams they had a few years ago. Recruiters and industry sources say oil is still the best staffed commodities business, with power and gas in second place and metals third.
But some believe the greening of industries and economies could eventually lead to a change in the hierarchy.
“In the next five years, banks may have more people in power and gas than in oil,” said Dylan Pany at recruitment consultants Phaidon International.
Overall, commodities businesses have become far less profitable for investment banks as tougher capital regulations have reduced their ability to take positions in physical markets, or own assets such as warehouses for metals.
Some banks suffered huge commodities losses during the financial crisis and performances since have been patchy, leading them to cut back on commodities operations. That has allowed trading giants and brokers subject to less onerous regulation to take the lion’s share of the commodities market. — Reuters