Barclays will announce Tuesday that it plans to exit large parts of its commodities business, said a person briefed on the bank’s plans, following other major investment banks that are struggling with heightened regulatory scrutiny and falling profits.
The British bank is among the top five banks in the commodities business that control much of the global market.
Barclays will shed a number of jobs, adding to the tally of layoffs from a broad restructuring aimed at getting the bank back to solid footing.
Antony Jenkins, the chief executive, has said Barclays will get out of businesses that do not generate returns greater than the bank’s cost of capital. The investment bank, which includes the commodities business, fell short of this goal last year reporting a return on equity of 8.2 percent.
The bank will either shut down or sell much of its metals, energy and agricultural commodities business, said the person with knowledge of the plan, who spoke on the condition of anonymity because it was not yet public. Precious metals trading will be folded into foreign exchange trading, said the person.
JPMorgan is selling its physical commodities business for $3.5 billion to the Mercuria Energy Group of Switzerland, started by two Goldman Sachs traders. The business trades hard assets, as opposed to the financial instruments that are tied to commodities.
Deutsche Bank, Morgan Stanley and Bank of America Merrill Lynch have all sold or closed parts of their commodities operations in recent months.
Goldman Sachs is the only bank that has so far said it will remain in the business, saying it is too important to clients.
The United States Federal Reserve paved the way for banks to expand their commodities businesses when it enacted an exemption several years ago to allow them to own pipelines and storage facilities for oil and other commodities. It is considering restrictions on the activities of financial holding companies in the physical commodities markets.
The Financial Times first reported the Barclays announcement on Monday. It cited a report by Coalition, a market analytics firm, showing revenues from the top 10 banks in commodities fell to $4.5 billion last year from $14.1 billion in 2008.
Barclays website says that it has 160 people who work in commodities trading, sales and research. It is not clear how many of those jobs would be eliminated.
A spokesman for Barclays declined to comment.
Earlier this year, Barclays closed its power trading business in the United States and Europe. The Federal Energy Regulatory Commission, the government watchdog overseeing the oil, natural gas and electricity business, last year announced a $470 million fine against Barclays for suspected manipulation of energy markets in California and other Western states by some of its traders from 2006 to 2008. Barclays is fighting the charges in court.
