In tune with its efforts to boost the energy trading business,
) has taken over
Deutsche Bank AG
) power trading books, according to a
report. These power trading books cover the ERCOT region in Texas
and the East and Midcontinent.
Citigroup's commodities trading operations primarily focuses on
power and natural gas. Following the financial meltdown in 2008,
the company streamlined its exposure in the energy, metals and
agricultural markets. Further in May,
reported that the bank will commence trading physical Canadian
crude oil and strategizes to expand its commodities trade finance
In the wake of tighter regulations when several Wall Street biggies
Bank of America Corporation
) and Morgan Stanley pulled back their interests in the energy
commodity trading sector, Citigroup is moving in the opposite
It seems Citigroup's latest move is in line with its strategy to
grow its profitable ventures while divesting non-core assets.
Notably, during first-quarter 2014, Citigroup's revenue from the
commodities operations increased twofold on a year-over-year basis.
Continuing with the offloading of the legacy problem asset
portfolio, Citi Holdings' results were close to breakeven and
management expects it to reach the breakeven point by 2015.
On Deutsche Bank's part, the move came as part of the process of
winding down its energy trading business owing to regulatory
pressure and lower profits. Notably, in Dec 2013, the German bank
announced that it will close its trading operations in energy,
agriculture, base metals, coal and iron ore, while continuing with
precious metals and a few financial derivatives traders.
Apart from Deutsche Bank, another European counterpart
) initiated a similar move as it closed its power trading desks in
London and New York in Feb 2014.
As Citigroup is encountering issues from various fronts including
the ongoing investigations related to the Mexican fraud and the
Federal Reserve's rejection of the company's 2014 capital plan, the
latest move could support its financials to some extent.
Citigroup currently carries a Zacks Rank #3 (Hold).
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