(Adds details in second paragraph on nature of Citi's services,writes through)
By Maytaal Angel and Silvia Antonioli
LONDON, July 29 (Reuters) - Citigroup Inc has hired aphysical iron ore trader from Deutsche Bank AG tohead its global bulk commodity sales team, as the U.S. banklooks to capitalise on some rivals quitting the sector and fromincreased market volatility.
Vlad Stoychev, who started at Citi on July 14, will betasked with attracting iron ore and coal clients to the bank, inboth the physical and financing business, a spokeswoman said,offering services such as logistics, financing and hedging.
The move comes as the likes of Credit Suisse,Deutsche Bank, Barclays and JPMorgan leave thebusiness due to unprecedented regulatory scrutiny and diminishedmargins.
Citigroup's revenue from commodities transactions nearlydoubled in the first quarter of 2014 year-on-year, reaching $224million and just $43 million shy of its totalcommodities trading haul for all of 2013.
"Some banks are getting into iron ore because volatility ishigh in bulk commodities, so there's more clients, moreopportunities for prop (proprietary) traders outside banks, andthat gives banks some client flow business to execute," said anindustry source.
Prices for iron ore <.IO62-CNI=SI> have dropped around 30percent this year, while thermal coal prices haveeither risen or fallen by between 5 and 10 percent almost everymonth this year, offering increased profit potential for banks.
At the same time, the iron ore derivatives market iscontinuing to mature, meaning banks can offer more services toboth physical and financial clients looking for exposure to theworld's no. 2 traded commodity after oil.
Singapore Exchange (SGX), which clears more than 90 percentof globally traded iron ore swaps, said the total volume oftrade in iron ore swaps, futures and options reached 205.4million tonnes from January to May, up 113 percent from a yearearlier.
Citi scaled back its exposure to energy, metals andagricultural markets following the 2008 financial crisis, buthas been rebuilding its commodities operations over the last year.
It joins Goldman Sachs and Morgan Stanley asthe last of the big banks standing in commodities, but facescompetition from smaller rivals like BTG Pactual, Standard Bank, Macquarie and ANZ. (Editing by David Evans and David Holmes)
Barclays (BARC)
