Deutsche Bank Plans To Boost Commodity Trade Finance Business Activities

At a time where the European lenders are stepping back from commodity trade finance, Deutsche Bank AG is all set to boost its business in the respective sector, to help enhance its regional businesses, according to Daniel Schmand, the bank's global head of trade finance and lending.

"We are reviewing our commodity trade finance business to see where we selectively can take market share, We are positively looking into opportunities in that space”. Daniel Schmand told S&P Global Market Intelligence.

The types of trade finance the Deutsche Bank is going to provide lending services include energy, agricultural and metal commodity value chains, as well as providing funds to producers, refineries as well as to the “middlemen”, the commodity traders. The overall revenue growth for commodity trade finance was reported US Dollars 4.7 billion across the world in 2019, as per the Coalition, an S&P Global research company.

According to Daniel Schmand, in 2021, Deutsche Bank is expected to witness “flat to single-digit” growth in revenues from commodity trade finance. However, it can vary due to the growth of commodity prices. This initiative by the bank leads European peers to lower their activities in the sector. In fact, a complete discontinuance on the commodity finance and trade activities has been announced by the ABN AMRO Bank NV in August in this regard while in the said month, the deals in the new commodity trade finance in Europe have come to an end by BNP Paribas SA along with the Middle East and Africa. Also in September, it put up the shutters on its Swiss commodity trade finance business, according to Bloomberg News.

As a result, Société Générale SA also plans to end its trade commodity finance activities in Singapore due to the failure of business firm Hin Leong Trading (Pte.) Ltd, according to the same news source. The fall in the translation values because of the unusually low oil prices and plenty of high-profile bankruptcies have affected the bank’s revenues through commodity trade finance during the pandemic.

There was a 29% drip in the total revenue from the commodity trade finance for banks worldwide year over year in the initial half-year of 2020 which also includes a 40% decrease in the second quarter, according to Coalition.

As per Schmand, while the different banks may have been exposed to particular business traders, he added that the initiative by the bank “has worked out well” from a risk view. "We think we have the right controls, the right risk framework, which allows us to play in that space," he said.

As per the reports, Deutsche Bank was one of 23 banks, including big lenders such as HSBC Holdings PLC, Standard Chartered PLC, Rabobank, Crédit Agricole SA, and DBS Group Holdings Ltd. The above-mentioned lenders provided $3.85 billion to Hin Leong Trading in April. Schmand explained that his perspective towards the Bank's trade finance activities was positive initially, hoping that the boost in financing will restructure to earlier pandemic levels by the middle of the next year.  


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