Citi faces headwinds in commodity trade finance, presses on with expansion

A perspective of a extraneous of a Citibank Corporate domicile in a Manhattan precinct of New York City, May 20, 2015.  REUTERS/Mike Segar Thomson ReutersA perspective of a extraneous of a Citibank Corporate domicile in a Manhattan precinct of New York

By Eric Onstad and Anjuli Davies

LONDON (Reuters) – Citigroup Inc and rivals in a commodity trade financial zone are confronting headwinds of diseased oil prices, sanctions on Russia and unbending competition, that have pressured fees.

The U.S. bank, that launched a business in a zone 3 years ago, has shifted courtesy from China, where fees are weak, to Africa and Latin America, pronounced Kris outpost Broekhoven, tellurian conduct of commodity trade finance.

“It’s still a tough environment,” he told Reuters.

“China is not an easy market. It’s really rival and pricing is low. We wish growth, though not during any cost.”

Citi started off with oil, combined metals final year and skeleton to embody rural line by a finish of 2015.

The bulk of a business has come from financing deals with large trade houses and this is being stretched to embody a subsequent tier of mid-sized traders, Van Broekhoven said.

But a pointy dump in oil prices means that a value of business in a zone accessible for financing has tumbled.

“For a same series of barrels, for a same cargos that pierce from one place to another, a value is half of what it was before,” he added.

“That means that banks have to quarrel to get their credit lines utilized, that drives pricing down.”


At a same time, costs are rising due to a heavier weight of correspondence and regulations.

In certain cases, Citi has refrained from certain business when a earnings were not enough.

“When a costs are increasing, during a certain indicate it no longer creates clarity to do something during a cost a customer is paying,” he said.

“I do trust a impulse will come when banks will reprice a bit upwards. That’s one thing we would design over a subsequent 12 months.”

Citi, a third-biggest U.S. bank by assets, is dire on with a enlargement in commodity trade financial and is still flourishing a revenues in a zone each year notwithstanding a challenges, Van Broekhoven said.

According to a news in a Financial Times in 2012, Citi directed to make some-more than $200 million in net income from a business within 3 years. Van Broekhoven declined to give specific income total or to criticism on a reported target.

Sanctions on Russia due to a Ukraine predicament have also had an impact on Citi’s business given it has been a large actor in a region, Van Broekhoven said.

To assistance opposite a challenges, a commodity trade financial business, that has a headcount of 14, skeleton to enhance into Latin America this year. Citi skeleton to supplement staff in that segment and is also recruiting someone to run rural trade financial globally, he said.

(Editing by Susan Fenton)

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