Citigroup Inc. has informed that it will cut back business in Russia, where it has exposure to billions of dollars in Russian assets and employs thousands of staff. Others like JPMorgan Chase & Co, Goldman Sachs Group Inc., and Deutsche Bank AG are also exiting with few financiers relocating to Dubai. Following them are other professionals, including lawyers.
This is one of the fastest and harshest exclusion of economy in a major industrialized country. The past weeks saw frantic efforts to implement sanctions continuously updated the U.S., U.K., and European Union.
The sanctions on Russia
The sanctions have brought the once busting desks in Russia to a halt while traders are stuck with Russian bonds and shares, and the derivate linked to them have turned limbo. Private bankers to the Russian Billionaires are worrying as the now sanctioned oligarchs are struggling to pay their cleaners of the mansions in London.
The finance industry has billions of dollars at stake. Dozens of lenders, including Citigroup, Deutsche Bank, and Raiffeisen Bank International AG, have a combined exposure of around $100 billion as per Bloomberg data. Though they can easily absorb any loss from their Russian business, these companies are stressed.
Till last month before the invasion of Ukraine, financiers in Moscow were in rude health till it collapsed. A regional investment manager who did not wish to be named saw the $6 billion pension fund he was handling for his clients now finds them to be fraction if not zero valuation.
The staff of VTB Bank PJSC, which is sanctioned by the U.S. and many of its units frozen in Britain, finds that the calls to the Western firms go answered or get return emails. This has resulted in investment Bankers struggling to close trades with their western counterparts.
VTB, the second largest bank in Russia, declined to comment. Many have managed to come out of the outstanding trades, while some are still in touch with VTB. Others sanctions have also been announced.
Bank of Russia has announced that it was preparing to open its stock market for a few local stocks on March 24, giving a glimmer of hope to traders looking to exit the equity positions. The closure is the longest in Rus’s history, and short selling in the stock market will be banned.
The complex web of relationships between global banks and Russia is through LetterOne Holdings. This investment firm is founded by Russians, including billionaires like Petr Aven and Mikhail Fridman. As per Bloomberg News, around $547 million of Letter One money is parked with HSBC Holdings Plc hedge fund and $345 million with Blackstone Inc. Pamplona Capital Management, handles around $3 billion of LetterOne’s money has started to return the funds.
Larger corporate clients that are unwinding are JPMorgan, Société Générale and UBS Group.
