Dutch bank ABN AMRO plans to increase its presence in commodity trade financing and mining project financing, in a bid to boost growth in its metals, energy and agriculture business, the bank's global head of metal commodities said. Piet-Hein Ingen Housz said the state-owned bank has tripled revenues in its energy, commodities and transportation division over the last four years, and will focus on growing its business in growth markets such as China.
In the latest move to grow in trade financing, the bank launched a structured inventory desk in Singapore this month to service Asia-based clients, where the bank plays an intermediary role by taking legal ownership of the physical commodity for a period of time in exchange for short-term funding.
It already runs the service from Amsterdam and New York.
ABN AMRO's plans come as investment banks cut back on commodities due to regulatory pressure and shrinking revenues, but the Dutch bank still saw demand for services in the sector.
"Banks are pulling out of commodity trading but not out of commodity trade finance. There is still good demand from clients for this," Ingen Housz told Reuters in an interview on October 15.
The size of ABN AMRO's energy, commodities and transportation division's loan portfolio is 15 billion euros, against an overall loan book of 261 billion euros.
Ingen Housz said the bank is also expanding into financing existing mining projects.
Mining companies with smaller capitalisation have been hit hard by plummeting shares in the wake of a slump in metals prices and spiralling costs, making equity financing harder to come by for junior miners listed on London's AIM Exchange and Toronto's TSX Venture Exchange.
"We started offering performance-based lending to finance existing mines a year ago and we are planning to do more of that," Ingen Housz said.
"We have a structure where we feel comfortable to finance mining companies where others are now pulling out."
He said the bank, which has so far offered financing to mining projects in Russia and Brazil, is working on a "few more" such projects at the moment.
CLIENT BROKERAGE
Ingen Housz said the bank also plans to establish metals brokerage services in London and Singapore within a year or two to complement its client brokerage business in New York.
"It is very difficult if you have to service your Asian and European clients from New York. You need a presence in the different time zones so that you can book the transactions."
"We already have the clearing capabilities and it is a logical added-value to do brokerage as well."
ABN AMRO is a Category 2, or associate broker clearing member, on the London Metal Exchange which allows the bank to trade on the exchange's electronic platform and the telephone market, but not in the ring.
Ingen Housz said the bank has no plans to apply for Category 1, or ring-dealing membership.
He said the bank is expected to hire a significant number of people across the energy, commodities and transportation division over the next two years to establish itself as a top player in the commodities space. Last month the bank hired Jan-Maarten Mulder, who previously worked at commodity trader Trafigura, as the new global head of commodities to support the bank's growing commodities business.
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