Azernews.Az

By Bloomberg

Sberbank CIB boosted commodities staff as a slump in oil and metals spurred demand from Russian companies for a protection from volatile prices.

The bank’s commodities trading team now consists of 20 people, up from four 18 months ago, said Francois Mantion, head of commodity trading at Sberbank. As global lenders from JPMorgan Chase & Co. to Deutsche Bank AG trim or exit raw materials operations, Russia needs a bank with expertise in the field, he said. Russia, the world’s biggest energy exporter, gets about half of its budget revenue from oil and gas.

“Commodities is a natural asset class for a bank in Russia,” Mantion, who joined the corporate and investment banking arm of Russia’s biggest lender from JPMorgan in 2013, said in an interview in London on Wednesday. “There is no trimming. We are growing stronger and stronger.”

Oil prices that reached the lowest in almost six years last month coupled with U.S. and European sanctions imposed over Russia’s involvement in the Ukraine conflict are pushing the nation’s economy into a recession. Moscow-based Sberbank, which was among six Russian lenders restricted from borrowing in the U.S. and European Union under sanctions, got more requests for hedging arrangements last year as volatility intensified.

The Bloomberg Commodity Index of 22 raw materials dropped to the lowest since 2002 last month amid oversupply and concern slowing economic growth will damp demand. Brent crude, the benchmark for more than half the world’s oil, fell to the lowest since 2009 and is down 48 percent from its June peak. Nickel dropped 32 percent from its May high while palladium, used in vehicle pollution-control devices, is down 15 percent from its September peak. Moscow-based OAO GMK Norilsk Nickel is the world’s largest producer of palladium and a top-two producer of refined nickel.

‘Challenging’ Year

“It was a challenging year for sure,” Mantion said, referring to 2014. “The geopolitical environment is not easy but at the same time because of volatility in the markets we got a lot of requests” for hedging, he said.

The Bloomberg Commodity Index’s 30-day historical volatility rose this month to the highest since 2012. The gauge is heading for the worst start to the year since 2010, data compiled by Bloomberg show.

Volatility is prompting Russia’s biggest companies, which traditionally made limited use of hedging, to seek greater protection from price swings, Mantion said. The bank arranged a multi-year hedging program on 40 million barrels of oil on the back of a credit-linked facility for a Russian oil company shortly before prices started to collapse, he said, declining to identify the company.

Sberbank trades in oil, industrial and precious metals derivatives. It also trades physical bullion. The additional trading and sales staff hired by the bank are focused on energy and metals, he said.

“We don’t want to pretend we are global,” Mantion said. “We want to focus on the most natural sectors for us within Russia” and the Commonwealth of Independent States, he said.