London: Citigroup is reviving its commodities role with a big hiring drive and tougher regulation in Europe and the United States means the focus will be on Asia, its global commodities head said.
Citi is finding it hard to attract staff to London because of high taxes, uncertainty on regulation and a general atmosphere of distrust of banks, Stuart Staley, Citi’s global head of commodities, said at the bank’s London head office.
“Hiring in London is challenging at the moment,” he said.
“In addition to the overall tight market for talent, the regulatory uncertainty has made it more difficult to attract people from other jurisdictions.”
Citi had to cut drastically its exposure to commodities after being bailed out by the US government during the 2008 economic crisis.
The credit crisis also battered Britain’s banking, prompting a government commission, which recommended a shake-up of the industry. Some banks threatened to quit London, and public anger remains high. Staley said Citi had nearly doubled its headcount in Asia to around 45 from the start of 2010, while in Europe, Middle East and Africa it has risen to about 120 from 100. The headcount in North America remains flat at 150.
London still ideal
He did not see Asia as becoming bigger than Europe in the foreseeable future, largely because of its geographical position.
“From a timing and infrastructure perspective, London is still an ideal location to run a global business,” Staley said.
“We have shifted some roles among regions, but it’s hard for me to see our London presence getting considerably smaller.”
Staley said that the rapid growth in commodities investing that has seen over $400 billion invested in the asset class according to industry estimates, is set to persist.
“I think we will see 15 to 20% per annum growth in asset allocation to commodities over next two years, and that’s being conservative,” he said.
“Institutional investors all talk of increasing their allocations to commodities and almost all are still underweight where they should be or would like to be.”
He sees mergers and acquisitions picking up in the sector, particularly in booming shale gas.
“A lot of things are changing in the sector and often the best way for companies to respond to those changes is by acquiring,” he said.
“I think you see this most clearly with the rapid innovation in shale development and the interest in US and foreign companies acquiring that expertise.”
He said it was hard to see Brent crude “getting much softer” than current levels.
“I don’t think that we will keep going at this rate, but I view the market as skewed to the upside because of the political instability but the underlying demand story doesn’t speak to a hugely supportive price environment,” he said.
Prices for Brent peaked at just above $127 a barrel so far this year. It has since fallen and was trading around $112 per barrel on Tuesday.
On gold, Staley said he would not be surprised to see the metal breach $1,600 an ounce in 2011, but saw base metals range bound. Gold was trading at around $1,542 per ounce on Tuesday, from $1,539.95 late in New York on Monday.
“We tend to be more constructive on the precious metals, than base metals. We’re more concernd about liquidity and inflation, and see the opportunity for gold in that enivironment,” he said.
“We’re not hugely bullish on the global growth story, and I think we’re seeing some warning signs in a few places and I think that probably serves to moderate the upside in the base metals complex,” he said.