Citi Finds New Revenue Stream in Crisis-Ridden Europehttp://www.fool.com/investing/general/2012/09/10/citi-finds-new-revenue-stream-in-crisis-ridden-eu.aspx John Grgurich
September 10, 2012
In the last few years, big American banks have left few stones unturned, and few continents unexplored, in their search for new revenue streams: Post financial-crash regulation has forced them to. But, of all the places you'd expect them to find a new source of revenue, crisis-ridden, recession-plagued Europe is probably the last. But that's exactly what Citigroup (NYSE: C ) has done.
The art, and profit, of the commodity deal
Say a trader wants to purchase $100 million worth of soy beans in the hopes of finding a buyer later. A bank will step in, fund the deal, and carry the $100 million on its balance sheet until the trader can find a buyer and make the sale. The bank then collects a tidy profit on the deal. It's a simple, straightforward way to make money: potentially, quite a lot of it.
According to Kris Van Broekhoven, the Deutsche Bank (NYSE: DB ) executive Citi poached to head up the new unit, the bank expects to make $300 million in net profit from commodity-trade financing over the next three years. Nothing to sneeze at, even for a leviathan like Citi.
One regulation to rule them all
And new is the name of the game right now in banking. It has to be. The 2010 Dodd-Frank banking legislation changed everything. Even the old-line investment banks have started to move back into safer, more traditional lines of business. Goldman Sachs (NYSE: GS ) and Morgan Stanley (NYSE: