business

Goldman Turns to Hiring Spree for Commodities Trading Fix

Updated on
  • Firm adds Morgan Stanley’s Jindal, Castleton’s Yarrow to unit
  • Commodities division is on pace for worst year on record

Goldman Sachs Group Inc. isn’t throwing in the towel on its commodities business just yet.

The bank has hired a slate of traders from rivals to turn around that business after it suffered the worst quarterly performance in the firm’s history as a public company. Once Wall Street’s dominant trader of the asset class, Goldman Sachs saw its commodities trading revenue plunge by more than $600 million in the first nine months of this year.

The firm hired Nitin Jindal as a partner from Morgan Stanley to head North American natural gas and power trading, according to an internal memo Tuesday. Goldman Sachs also added Jon Yarrow as a managing director from oil and metals trader Castleton Commodities International LLC, according to spokesman Sebastian Howell. Both will join in the coming months.

The firm welcomed a trio of vice presidents in the last two months: Steve Baker from Castleton for oil trading, and RK Capital Management’s Rob Hawkes and Caxton Associates’ Ryan Belshaw for base metals trading, Howell said. The three and Yarrow will be based in London, while Jindal will work in New York.

Goldman is bolstering the ranks at the roughly 180-person commodities unit after this year’s poor performance led to an internal review and sparked some high-profile departures, including global commodities head Gregory Agran. The informal review, led by securities division co-head Isabelle Ealet, examined whether the unit should keep its headcount steady or consider large-scale cuts in a business that Chief Financial Officer Marty Chavez told investors this month is “challenged on all fronts.”

Notable Departures

In addition to Agran, who’s set to leave at the end of November, departures included head of U.S. power trading Teoman Guler and Anish Hariharan, who joined EDF Trading North America in February. In June, Owen West, global head of natural gas trading and co-head of global power trading, accepted a position in the Trump administration.

Still, co-President Harvey Schwartz told investors last month that commodities hedging is one area where the bank can boost revenue.

Jeremy Taylor, who joined the bank last year from Mercuria Energy Group and relocated to London to serve as head of trading in Europe, the Middle East and Africa, helps lead commodities trading with Ed Emerson. The bank also relocated Peter Goertzen, a managing director, to London.

Goldman has for decades boasted the leading commodities franchise among Wall Street banks. Its revenue from commodities rose from less than $500 million a year between 1981 and 2000 to a peak of $3.4 billion in 2009, according to a Senate report on U.S. banks’ involvement in the commodity markets.

This year, the unit has had trouble making money and Macquarie Group Ltd., the Australian lender better known for infrastructure investing like highways and airports, has emerged as the largest bank in commodities.

The unit’s second-quarter results were the worst since Goldman Sachs’s initial public offering in 1999, Chavez said in July. While the performance improved in the third quarter, Goldman is still "on track" for its worst annual commodity performance on record, he said. It’s a rare black eye for Ealet, who ran the commodities unit for five years until 2012 -- a golden age for the division when revenue regularly topped $3 billion per year.

Commodities "inventory challenges" accounted for half of the decline in the bank’s overall fixed-income, currencies and commodities trading revenues through the first nine months of 2017 compared with last year, Chavez said. Those revenues fell by 23 percent -- or $1.26 billion -- over the period, suggesting commodities inventory accounted for about $630 million. Metals have led gains in commodities this year, with copper, aluminum and zinc rising more than 25 percent.

— With assistance by Jack Farchy

(Updates to add metals leading commodity performance this year.)
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