News: Westpac commodity finance division expects revenue growth this year

HONG KONG, June 15 (Reuters) - The structured commodity finance division of Australia's Westpac bank expects revenues to grow by a third this financial year as new products gain momentum, but business is likely to level out next year as the global economy falters.

Westpac Banking Corp (WBC) set up its Hong Kong and Singapore-based commodity financing business in 2013-2014 to tap trade flow from its home market to China and to capture demand from Asia's urbanisation drive, just as many global banks, stung by increasing regulatory costs, quit the sector.

It has maintained a team of around eight, with its smaller size and lower cost base insulating it from some of the headwinds facing larger rivals, said Paul Gardner, Westpac's global head of structured commodity finance.

"We are on target for revenue growth of 35 percent over last year's number. In current market conditions I am expecting growth to level out next year," he said of the financial year ending September. He did not give actual revenue figures.

The bulk of Westpac's business has centred on base metals, in prepayments and repurchase (repo) agreements for copper and aluminium. But with many commodity markets mired in gluts, there is less need for finance for capacity build out, Gardner told Reuters in an interview.

In agriculture, Westpac is in the final stages of launching a repo product in its home market, while the downturn in energy prices has opened the door to lend against undeveloped fields.

For its key metals business in China, Westpac is tapping large corporates such as copper smelters which are still making good margins given a surfeit of copper concentrate, he said.

"When you’re in this part of the cycle, it’s about the counterparties you play with. Lowest cost producers, not over levered," he said.

Further out, Westpac is looking to develop a business in renewables, such as for lithium and graphite projects, which are used in solar and hybrid car batteries, but also keeping a sharp eye out for potential technology disruptors, where aluminium, with its fast charging properties, may have a role.

"As you wind down your fossil fuel capacity, you're starting to look at major areas of growth in renewables."