January 31, 2018 / 3:16 PM / 3 months ago

UPDATE 4-Goldman loses more commodities traders in broader overhaul

(Adds background on commodities markets and adds departure)

By Catherine Ngai and Devika Krishna Kumar

NEW YORK, Jan 31 (Reuters) - Several key commodities traders are leaving Goldman Sachs Group Inc, sources said on Wednesday, the latest wrinkle as the Wall Street firm seeks to turn around its struggling commodities unit.

Those leaving include Don Casturo, operating chief of global commodities; Saad Usmani, a London-based managing director who traded crude oil and natural gas; Rahul Dhir, who traded refined oil products; and Will Evans, a global franchise manager, according to people familiar with the matter, and a Jan. 30 memo announcing Casturo’s departure seen by Reuters.

The sources requested anonymity because they were not authorized to speak to the media.

While Goldman posted its first quarterly loss since 2011 of $4.4 billion due to changes to the U.S. tax law passed by Congress in December, analysts and investors have been closely watching the decline of its trading book.

Commodities trading was the main driver of a 30 percent decline in Goldman’s broader bond trading business last year, Chief Financial Officer Marty Chavez said on Jan. 17.

Goldman hired several new senior traders late last year to turn around the business and replace people like Greg Agran, who left as co-head of commodities trading in September after 26 years with the bank.

Departures at banks are common at this time of year after traders wait to receive their bonus payout. With lower trading revenues across the industry in the fourth quarter and full year, recruiters said that many would be getting lower payouts for 2017 payments.

Sources said previously that managers in Goldman’s commodities trading unit had warned some staff to expect little to no bonus.

The bank has been working reduce risk and manage assets that were hurting results toward the end of 2017, CFO Chavez added in the earnings call earlier this month. Goldman is focused on catering to clients rather than placing bets on price moves, he added, noting that trends are hard to predict.

“I remember when I was in that business and people would ask me, ‘What do you think about the outlook for oil prices?” he said. “I would say, accurately but perhaps not all that helpfully, 50 percent chance they go up and a 50 percent chance they would go down.”

Commodity trading firms and banks posted major losses in 2017 due to muted client activity and volatility in energy markets. A number of firms suffered heavy losses in the first half of the last year after the slide in natural gas prices , while others lost money in the second half due to swings in oil prices during Hurricane Harvey, analysts said.

Last week, Jamison Capital Partners LP, a $1.5 billion commodity hedge fund, told investors it was closing by the end of January. It follows other big names that have closed in recent months, including Andy Hall’s Astenbeck Capital Management and Texas tycoon T. Boone Pickens

Goldman is the only large U.S. bank that has continued trading and investing in commodities in a major way. Rivals including Morgan Stanley pulled back years ago after a public outcry over banks potentially influencing commodities prices, and as regulatory scrutiny increased.

Its chief executive, Lloyd Blankfein, spent the early days of his career at the bank selling gold.

Casturo, the outgoing commodities operating chief, first joined Goldman in 1998. News of his departure was first reported by Bloomberg.

Among those who joined in recent months are Nitin Jindal, who became partner and head of North American natural gas and power trading, and David McKeon, formerly of Castleton Commodities International LLC, who is now a managing director and senior oil trader at Goldman. (Additional reporting by Marcy Nicholson; Writing by Lauren Tara LaCapra, David Gaffen and Renita D. Young; Editing by Nick Zieminski and Clive McKeef)

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