Rallying commodity markets are adding to profits of Wall Street houses like Goldman Sachs and JPMorgan, and banks are ramping up commodity desks again, a year after the recession cut into operations.
From the United States to Europe and Asia, financial institutions are poaching from one another the best dealers in oil, gas, coal, metals and grains. But while competition for talent is heating up, headhunters say it is not as fierce as it was during the commodities boom in the middle of this decade.
Commodity desks produced strong trading results in the third quarter, as oil prices rose above $70 a barrel and copper traded around $2.80 a lb -- double the lows of last year -- and cocoa and sugar hit their highest levels in three decades.
Analysts polled by Thomson Reuters I/B/E/S expect Goldman to report that it doubled its quarterly earnings from a year ago, with JPMorgan returning to profit from a previous loss. With commodities trading adding to those results, the banks would have the funds and the incentive to bolster their desks.
Whilst there isn't going to be the volume of hiring in financial institutions that there would be during a bull market...key hires will still be made as businesses take advantage of strong performances in 2009 and look to replicate this going into the new year, said Elliot Pickering, consultant in London for Human Capital Search, a global employee search firm focused on commodities.
During the third quarter, Goldman Sachs hired two power traders who used to work for Barclays Capital and Morgan Stanley, according to data from Human Capital which showed well-capitalized banks poaching from rivals.
Goldman, whose business includes physical trading in crude oil, runs one of the largest commodities operations among global banks. Analysts estimate Goldman earned $4.24 per share before one-time items during the third quarter, up from $1.81 a year earlier.
Morgan Stanley, another major commodities trader, is expected to have earned 29 cents a share, down from $1.32 a year earlier.
Citigroup, despite its wider financial troubles, lured away two gas dealers from Deutsche Bank and hedge fund Saracen during the third quarter.
Citi, which has identified commodities as a growth area despite the sale of profitable energy trading arm Phibro, also hired during the third quarter a power trader from BP. and another energy dealer from Australian bank Macquarie Cook.
JPMorgan took away four coal industry specialists from Bank of America/Merrill Lynch for its London operations.
Bank of America/Merrill Lynch made a number of key hires in Asia and the United States during the quarter, including a chief for regional power trading and a head for gas options trading. It said in August that it intended to expand its commodities team by 25 percent over the next two to three years in anticipation of strong demand for commodities.
Analysts said with top U.S. banks having returned or trying to pay back bailout money they took from the government, the once-feared government limits on pay had also become a less of an issue for financial institutional in drawing talent.
Compensation is back to decent levels at banks, said Vikram Tandon, head of commodities hiring at New York-based headhunter Options Group. Commodities, particularly, is a hot area that's seeing more flexibility on this.
But banks are also more thoughtful in hiring now. In the past, it was just about filling a slot, said Tandon. Now they want to see every moving part in that slot filled.