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Rothschild to pull out of gold market
By Charles Pretzlik
Financial Times
Wednesday, April 14, 2004
http://news.ft.com/servlet/ContentServer?
pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1079420344695
N.M. Rothschild, the investment bank, is to withdraw from
the gold market, turning the page on two centuries of
history.
The same company that smuggled gold coins across the
English Channel to finance the Duke of Wellington's military
advance through France 200 years ago will also withdraw
from the twice-daily London gold fixing, which it has
chaired since the first fix of the gold price took place in
1919.
This follows a review by Baron David de Rothschild, the
bank's new chairman, concluding that it should withdraw
completely from commodity trading.
This means Rothschild will also pull out of oil trading --
less than a year after announcing an expansion into that
area.
Baron David said the income generated by commodity
trading was increasingly insignificant to the bank. "Five
or 10 years down the road, can we be a meaningful
house in commodities? The answer must be 'no,'" he
said.
Gold producers were buying far fewer hedges, which
Rothschild specialised in and the firm had neither the
infrastructure nor the risk appetite to be a big trader, he
added.
"It is clear that the revenues we have generated from
commodities -- in comparison with those from
investment banking, [corporate] banking, and those we
think we can generate from private banking -- have
definitely declined," he said.
Up to 40 jobs could be lost by the move and about
50m of capital will be released. This will be reinvested
in developing the bank's nascent private banking
business and in expanding its corporate banking
operation.
It has recently made some small acquisitions in asset
finance and is keen to be a more aggressive lender in
property, natural resources, acquisition finance, and
structured finance, Baron David said.
He is also looking at putting some of the capital into a
new fund which would make principal investments and
in which staff could participate.
Withdrawing from the gold market is a break with the era
of Baron David's predecessor and distant cousin, Sir
Evelyn de Rothschild. Sir Evelyn was always proud of
the bank's association with the gold market but handed
over control of the bank last year and stepped down as
chairman last month. "Evelyn is perfectly relaxed and
supportive" of the exit from gold trading," Baron David
said.
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