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Comments (11)

Mar 25, 2021 - 7:39pm

great place among banks. Citi is pretty committed to commodities, unlike other banks which exit and enter depending on the markets. Starting at a supermajor/trade house will develop your skillset in a different way than starting at a bank, but can take longer to get a trading seat versus at Citi. Not sure about comp long term, but I know for the first couple of years your pay at Citi will be a lot higher than at a supermajor. 

  • Incoming Analyst in S&T - Comm
Mar 25, 2021 - 7:42pm

Thanks, this is definitely helpful! Would you be able to elaborate more on what you mean by Citi developing a different skillset as opposed to a supermajor or trading house?

Mar 25, 2021 - 8:08pm

I think the difference is the function of being physical versus financial. Because of that, in the dev programs at a supermajor, they want you to understand the operations side of things which is not a factor at most banks. I've talked to people at Citi and everyone seems competent and fairly nice-it's definitely a great place to start. If you want to trade physical, it might not be the best option though. 

Mar 26, 2021 - 12:49pm

Trading at a bank and working at a trade shop/supermajor are two totally different things. At a bank you are dealing with just the financial side of trading. Buying and selling futures/options depending on the desk in order to manage risk for clients as well as the banks personal book (in some cases) among other things. This isn't my area of expertise so I will let someone else add on.

At a supermajor or trade shop you are dealing with the physical operations of energy trading and trading is just another piece layered on top of that to manage price risk. How do you schedule volume on a pipe? What tanks are connected to others in a certain area? How long of a ride is it on a pipeline from point A to point B? Learning how to settle trades and make sure that the counterparty gets paid on time. Operations of the rail road. How and why you would blend two different grades of crude together. What are the spec requirements on each pipeline you deal with? The list goes on.

The skill set you will acquire at each is totally different.

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Mar 26, 2021 - 2:00pm

Citi is well respected in commodities.  They were a tiny shop about a decade ago but have really grown to be one of the top banks.  Overall, they are committed to that franchise, so I think it's a pretty solid gig for Houston.  

Can't speak too much about trade shops and SMs, but the career path is a bit different.  It's a lot of learning logistical stuff, and slowly moving into trading.  A bank will pay better upfront, but your max career upside is probably a bit lower.  That said, very few people attain that at a trade shop  or SM, so bank is probably higher career EV with lower overall variance.  

Mar 28, 2021 - 10:38am

Good bank as any of the others. lots of young talent and one of the better spots to start trading very early in your career. Some analyst get to start trading cash. I've even heard of some starting to trade cash 6-8 months out of school

Downside is once you get up the ranks they will most likely push you out so your options as limited to other banks or maybe a hedge fund but with little transferable skills outside of financial spec trading and also commodities is the ugly stepchild of Citi..FX/Equities/Debt trading are the big money makers while commodities just sucks up credit and capital with little ROI for the bank

Also if you want to learn anything about the physical markets this isn't the place to do it

Mar 28, 2021 - 2:11pm

Thanks for the response - as a follow up, why does citi keep their commodities division around if it's not as profitable?


Mar 28, 2021 - 3:05pm

Banks need to have a commodities hedging offering for clients in corporate/investment banking

Look at WF..doesn't really do much in commodities trading but has a substantial customer base where commodities hedging is a financial service offering

I wouldn't say the commodities franchises aren't profitable. They just require a lot of capital to be tied up for adequate assurance from counterparties whereas a business such as FX requires minimal capital but is hugely profitable and doesn't have potential to lose money. Commodities divisions can have losing years..

Apr 1, 2021 - 11:23am

I think a good amount of this is correct, but some stuff is a little off.  Commodities in general has better ROC than credit and rates; the issue is that it doesn't have the size to scale with those asset classes.  It's also sort of shrinking in the bank space, both from guys exiting the biz, and for banks to become B2B shops.  WF is notorious around the street for B2Bing everything - they just view the commods business as an extension of client credit.  Even guys like GS and JPM aren't really in the business warehousing much risk (this is something that's notably changed in the past 3-5 years).  I would say Macq, Bofa, Citi, and MS all still have decent risk tolerance and desire to warehouse risk to boost returns.  I think if you're looking at the banks in commods, there is a bigger difference between individual firms than say if you were looking at something like rates.  

The advantage commods has is that most of it's flow base is corporate - these guys are generally not toxic flow unlike most institutional clients.  Additionally, assuming those corporates are still in business, they will have a semi-constant demand to continue hedging, so in general the flow is predictable.  Obviously as risk tolerance increases, so does the probability of losing money, but in general I think the commodities asset class is relatively stable compared to the others.

Agree that banks are bad for phys.  Even the ones that are in that space are just tangential players in the market.

Mar 29, 2021 - 10:53am
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