* Bank will wind down brokerage business, including LME
ringdealing operation
* Process expected to take until year-end
* Natixis wants to cut exposure to capital-intensive
commodities market
By Josephine Mason and Sybille de La Hamaide
NEW YORK/PARIS, May 10 (Reuters) – French bank Natixis
said it plans to close its commodities brokerage
division, as one of the oldest ringdealing members of the London
Metal Exchange becomes the latest victim of the European debt
crisis.
The bank decided to wind up the brokerage activities of
Natixis Commodities Markets (NCM), which offers derivatives on a
range of metals, fuels and commodities, the bank said.
Over-the-counter activities will continue and operate in
cooperation with the bank’s structured finance operations, which
also offers commodities trade finance.
“This is part of our reduction plan because it is a business
which consumes a lot of liquidity,” Natixis CEO Laurent Mignon
told analysts in a conference call on Thursday.
“We consider that we really don’t have the critical size in
this business,” he added.
The future of NCM, which has been in metals broking under
several owners for almost 35 years, has been uncertain since
management said in January it was considering selling the
business.
The bank wanted to scale back its exposure to the
capital-intensive commodities business. Henrik Wareborn was
hired in September to head up the operation.
The 120-strong team in London was told by management of the
decision to wind down the brokerage on Wednesday afternoon, a
trader who had spoken to an NCM trader told Reuters.
“They were told it’s over. The business will be liquidated
in an orderly fashion,” the trade source said.
The move will effectively dismantle the ringdealing team on
the London Metal Exchange trading floor and will start the
process of liquidating customers’ accounts.
Closing accounts is expected to take until the end of the
year, the source said.
Natixis is not the only French bank to adjust its business
model.
In the last six months, Credit Agricole, BNP
Paribas and Societe Generale have all taken
measures to cut their exposure to dollar financing, reduce debt
and boost their capital ratios amid concern about the euro-zone
debt crisis.
The bank could be hoping for rich proceeds from its Category
I ringdealing LME membership, which is worth $17 million based
on recent sales.
The LME, the world’s last member-owned exchange, is
considering bids from four of the world’s major exchanges, which
are said to be in fierce competition to buy the 135-year old
exchange.
LONG HISTORY
Removing NCM will cut the number of brokers, dealers and
banks participating in open-outcry trading in the LME ring to
11.
It will be the first closure of a Category I seat for
several years, with most memberships typically changing hands as
a result of a takeover or a merger.
The newest member, INTL FCStone Inc, bought its
seat from the liquidator of collapsed MF Global and JPMorgan
Chase secured its membership as part of its acquisition of the
RBS Sempra commodities business in 2010.
NCM’s roots go back more than 30 years when it was owned by
Sogemin Metals, the London brokerage unit of the Union Mini re
Group (now Umicore SA ), which mined for copper in what
is now the Democratic Republic of Congo more than a century ago.
Union Mini re only broke ties with Sogemin in 2000 when it
sold the company to Natexis Banques Populaires, a unit of the
Banques Populaires group. The business was renamed Natixis
Commodity Markets when it merged with IXIS in 2006.
The NCM ring team is relatively new by LME standards – some
key members, including Stuart Neville, left to join ED&F; Man in
2007.
But many of the back office staff, including account
executives, have been with the company since the Sogemin days.
ED&F; also hired Udo Klein and Aaron Begner in New York from the
broker at the end of March.
Some high-profile senior members of the metals industry have
worked for the broker in its various guises, including LME chief
executive Martin Abbott and Triland chief Martin Pratt.
