BofA-Merrill Lynch closes European power and gas trading operation
The closure comes amid weak demand and low profits
Bank of America-Merrill Lynch has closed its European power and gas sales trading desk
Bank of America-Merrill Lynch has closed its European power and gas sales and trading operation. It becomes the fourth key industry player to withdraw from the European commodities market after the implementation of stricter regulation started to hit profits.
BofA-Merrill Lynch follows Morgan Stanley, Deutsche Bank and JPMorgan, all of which exited the market in 2013.
[I]t has been speculated that low profits deriving from lower demand were to blame for the closure
Morgan Stanley sold its oil-trading desk to Rosnet, the Russian state-run oil company. Deutsche Bank has also recently announced that it would be shutting down its commodities trading operations. JPMorgan put up its physical trading operations up for sale in July.
Though BofA-Merrill Lynch has not disclosed the revenue for the defunct desk, but it has been speculated that low profits deriving from lower demand were to blame for the closure. In a statement, the bank suggested the winding down “follows a recent review of its broader commodities activities and reflects the combined impact of lower client demand for European power and gas hedging and recent regulatory changes.”
Since the onset of the 2008 financial crisis changes in proprietary trading regulations have dampened demand for commodities trading, with revenues down in the sector over the past five years.
BofA has announced it will be selling off its current European power and gas portfolio, though it intends to remain active in the American markets. In the press release the bank said it “has made a long-term commitment to its commodities business, and will continue to trade coal, commodity indices, oil, metals, and US power and gas from its Houston, London, New York, and Singapore offices.”
