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Marex plans growth in commodities, into void left by banks

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Marex Spectron unveiled plans for "exciting new investments" in commodities, to fill the void left by banks' withdrawal from the sector, as the brokerage unveiled a further jump in operating profits, to a record high.

Ian Lowitt, who became chief executive of Marex in January, said that the London-based group planned to "expand in the areas where we enjoy a competitive advantage.

"We see significant opportunities as banks and other participants retreat from the commodity space," he said, in comments which follow the reduction by the likes of Barclays, Credit Suisse, Deutsche Bank, JP Morgan and Morgan Stanley to their exposure to the sector.

The banks' shifts reflect a tougher regulatory regime, and the desire to direct capital at the most profitable sectors during a period which has, over the past three years, been a difficult one in commodities, with declining prices prompting negative returns and the closure of many funds.

Indeed, the period has witnessed tie-ups among brokers too, with ADM Investor Services International, for instance, taking over Icap's base metal broking operations, Tullett Prebon purchasing oil broker PVM, and Ecom buying softs trader Armajaro Trading.

Profits rise

Marex itself has ditched a number of operations, such as foreign exchange trading, over the past three years, moves the group on Wednesday said had boosted operating profits by $32m - saving $42m in costs while reducing revenues by $10m.

The axing of the "underperforming" operations was seen as fuelling growth in operating profits last year to a record $23m, from $15m in 2014, on revenues down 5% at $348m.

"To produce record profits in a particularly challenging year for commodities is an exceptional result," Mr Lowitt said.

Top in softs

The broker attributed the growth in operating profits to factors including a "record year" on some energy desks, and growth in both revenues and earnings in agriculture.

In cocoa, coffee and sugar, Marex claimed top rank as an executor of options, "with a global share of around 25%".

The broker's growth projects of late include the launch of its Nanolytics service, which aims to cut out from commodity markets the "noise" from deals by high frequency trading hedge funds to determine underlying market behaviour.

This analysis is a "valuable guide to future price movements", Marex says.


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