Banks unwind aluminium financing deals, others keen to enter

Tue Feb 12, 2013 12:33pm EST
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* Regulations, capital requirements weigh on banks

* No shortage of takers as some unwind financing deals

* Warehouse rents offer good return in lean times

By Susan Thomas and Maytaal Angel

LONDON, Feb 12 (Reuters) - Several big banks are unwinding the lucrative financing deals that tie up millions of tonnes of aluminium as collateral in warehouses, but the activity is flourishing as eager rivals enter it or expand.

For years a handful of banks have been buying up aluminium and simultaneously selling it forward for instant profit to futures market speculators, then taking advantage of cheap funding to store it at low cost in warehouses.

Deutsche Bank and Standard Chartered Bank have been the two biggest participants with millions of tonnes of the metal under financing, metals and banking sources said. Credit Suisse had a sizeable holding too.

Aluminium financing deals can earn an investor an assured yield of at least 5 percent, not bad with interest rates around historic lows and with returns on equities and debt uncertain.

But banks across the world are cutting costs and selling off, or writing down, assets in a bid to meet tougher regulations aimed at preventing a repeat of the 2008 crisis.   Continued...