MOSCOW/LONDON: The annual “Russia Calling” investment conference kicks off this week in Moscow with investment bankers in no mood to talk.
Western sanctions have killed off any hope of a revival in takeovers, stock market debuts and international sales of stocks and bonds this year and some banks are firing staff and reshuffling roles to keep costs down.
“For investment banks, as for most other businesses in Russia, this winter will be all about surviving on low volumes,” said Chris Weafer, founding partner at Macro Advisory, a Russia-focused consultancy.
“The damage already inflicted by existing sanctions, even if they start to be eased in November, means that normal investment activities are dead until at least mid next year.”
For Russia’s state-controlled investment banks, VTB Capital, Sberbank CIB and Gazprombank, the situation is particularly acute.
Frozen out of Western capital markets due to Russia’s perceived support for separatist rebels in Ukraine, the sanctioned lenders have dropped down the local investment banking league tables as deals dry up and some customers steer clear of doing business with them.
VTB Capital, Russia’s largest homegrown investment bank, has lost its top spot in the rankings for the first time since 2010, falling to No 3 so far this year as its fee income slid 45 percent, according to data compiled by Thomson Reuters/ Freeman Consulting.
VTB Capital has ranked either first or second since 2009, the year after it was founded by Russia’s second-largest banking group, VTB Group.
VTB Group’s net profit fell 82 percent in the first half due to Russia’s economic slowdown and tensions over the crisis in Ukraine, it does not strip out the performance of VTB Capital.
Sberbank’s investment division has fallen five levels to rank No 7 on the back of a 46 percent drop in fee income. Gazprombank has stayed level at No 5 so far this year, despite seeing its fees fall by over a fifth.
Overall, Russian investment banking fee income has halved to $236m so far this year, according to the data.
Against such a backdrop, VTB Capital’s annual “Russia Calling” investment forum, featuring a guest appearance from President Vladimir Putin, will be held on Wednesday and Thursday. In previous years, it was a three-day conference. There are no plans to repeat last year’s sister events in New York and London.
Dominant at home, VTB Capital has had mixed success overseas and even before it was blacklisted by the West it had started to rein in its global ambitions, cutting and relocating some staff this year in New York and London.
The bank’s international chief executive Atanas Bostandjiev left in July. The bank said this month that it did not plan further job cuts beyond what had already been announced.
“VTB Capital does not plan to decrease the volume of its trading operations in its international offices,” a spokeswoman said.
While some banks, such as JP Morgan and Bank of America Merrill Lynch, have cut some Russia-focused staff, according to sources, major job cuts or restructurings have not yet happened.
Keenly aware that it is hard to rebuild in a country where having political goodwill is crucial, many foreign lenders are instead waiting to see if a fragile ceasefire in Ukraine takes hold, opening the way for a possible easing of sanctions.
Reuters
