Goldman Sachs Group Inc. (GS) made two senior appointments for its global commodities and metals businesses, said a person with knowledge of the matter.
Charles McGarraugh, currently head of European mortgage-product trading, was named global head of metals trading, said the person, who asked not to be identified because the information is private. Don Casturo, currently head of commodities investor products, has been appointed chief operating officer of global commodities.
The personnel changes are being made at at time when the world’s biggest banks are employing fewer staff members for their commodities businesses as tighter regulations and lower raw-material prices spur cutbacks. Investors pulled a record $36.3 billion from commodity products this year through November, according to Barclays Plc, while the Standard & Poor’s GSCI Index (SPGSCI) of raw-material prices is headed for the first annual drop since 2008.
“Market participants, whether it be corporate, governments or Wall Street firms such as Goldman, should not back away from their commitment to this sector,” Sandy Mehta, chief executive officer of Value Investment Principals Ltd. in Hong Kong, wrote in an e-mail today. “Investment banking in commodities should rebound smartly, predicated on stronger U.S. and Europe growth, and a flattening out and rebound in key emerging markets.”
The firm was ranked second to JPMorgan Chase & Co. in terms of commodity revenue in the first six months of this year, according to data from Coalition, a London-based analytics company. Revenue derived from commodities at the 10 largest banks from Goldman Sachs to Barclays will drop 14 percent to $4.7 billion this year, the data show.
Total headcount in commodity units at those banks dropped to 2,290 at the end of September, about 4 percent less than at the end of 2012, according to Coalition.
JPMorgan is seeking to sell its physical commodity business, while Deutsche Bank AG announced 200 employee cutbacks on Dec. 5. Goldman Sachs, which has put its uranium-trading unit up for sale, has no intention of selling its commodity business, Chief Financial Officer Harvey Schwartz said in October.
“It’s natural for banks to keep the commodities business for hedging opportunities,” said Ronald Wan, chief China adviser at Asian Capital Holdings Ltd. “It’s too early for them to quit this line of business. Demand for commodities and metals will recover eventually.”
Goldman Sachs is among banks whose ability to participate in the commodities markets is being examined by the Federal Reserve. The Fed is conducting a review while U.S. lawmakers and regulators raise concerns that banks might abuse their various roles in physical commodities markets, or that the businesses pose risks to the firms’ financial stability.
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