Fast-growing Swiss trading house Mercuria has hired a former top executive from Goldman Sachs (NYSE:GS) to run its global commodities trading as it expands further into territory abandoned by many top Wall Street lenders under tighter regulatory scrutiny.
A high-level Mercuria source told Reuters that Magid Shenouda, who was co-head of commodities for Goldman until the end of last year and helped build one of the strongest trading units among banks, had joined Mercuria.
Mercuria is closing a $3.5 billion deal to buy the physical commodities trading business from another Wall Street giant, JP Morgan.
"With the acquisition of JPM's business we will substantially grow in size and are looking at a turnover of $130-$150 billion," the source said.
The co-founders of Mercuria, Marco Dunand and Daniel Jaeggi, will focus on managing the company with emphasis on integration and client relations while Shenouda will run trading.
Shenouda was one of several recent senior departures from Wall Street's most famed commodity trader, which has said it is keen to keep the unit despite pressure from the U.S. Federal Reserve.
The Fed is conducting a review while U.S. lawmakers raise concerns that banks might abuse their roles in physical commodities markets, or that the businesses pose risks to their financial stability.
Shenouda is the latest high-level recruit from a bank by Mercuria, which has packed its senior ranks with former bank executives - unlike peers such as Glencore or Vitol, which traditionally promote from within.
Mercuria has hired former Goldman executives Shameek Konar and Victoria Attwood Scott to be heads of investment and compliance respectively.
Unlike Goldman, many other banks are exiting commodities, including JPM's selling to Mercuria, Morgan Stanley planning to sell to Russia's Rosneft, and Deutsche Bank and Barclays closing operations down.
Dunand, who has himself worked for several years for Goldman, has said he sees Mercuria as building a model in between banks and traditional merchants such as Vitol or Glencore.
Shenouda joined Goldman in 1999 from privately held Swiss-based commodity trading house Trafigura, where he traded fuel oil. He went on to run Goldman's European crude oil and products trading business, as well as European power and gas. He was made partner at the bank in 2008.
At the time of his departure, Goldman said he had been responsible for driving several acquisitions, as well as its expansion into coal, freight and emissions trading.
Goldman's J Aron commodity division is a century-old enterprise which the bank has said is "core" to its business.
Goldman President Gary Cohn ran J Aron for a period in the 1990s, and Isabelle Ealet, now the co-head of the securities division, was in charge for much of the 2000s. It has about 250 employees.
It now faces unprecedented regulatory pressure amid allegations its metals warehousing business might have inflated aluminium prices. The Federal Reserve is considering ways to pull back Wall Street's deep involvement in raw material markets, including the ownership of assets.
At the same time, revenues at Goldman and other banks have been shrinking as lower market volatility and tighter regulation hurt profits. (Reporting by Dmitry Zhdannikov; editing by William Hardy and Jason Neely)