(Reuters) - Citigroup (C.N) is set to start up a finance business for commodity trade to move into a void left by a pullback from the market by major European lenders, according to a report in The Financial Times.
European banks, including BNP Paribas (BNPP.PA) and Crédit Agricole (CAGR.PA), are scaling back their commodities financing presence to limit their need for scarce dollars and comply with tougher regulatory capital requirements, the report said.
Citi representatives were not immediately available for comment to Reuters.
John Ahearn, head of global trade at Citi, told the FT that the bank would start by financing energy deals before considering metals and other commodities such as wheat.
It has done ad hoc deals in the past, but now intends “to make it into a scale business,” Ahearn said.
Citi has hired Kris Van Broekhoven from Deutsche Bank to head the new unit and is targeting more than $200 million in net income from it within three years, the report said.
Citigroup Chief Executive Vikram Pandit has singled out trade finance as one of the brighter spots in the bank’s business portfolio. In comments following the release of second quarter results, Pandit emphasized that the company had built on its global footprint to increase its trade finance and carry revenue for transaction services for corporations to record levels.
Trade loans outstanding were up 53 percent at the end of June from a year earlier, according to the company.
Reporting by Bill Berkrot and David Henry in New York; Editing by Bob Burgdorfer