Western investment banks lost interest in Russia

The Exodus of foreign players from Russia can be a long-term trend. According to the interlocutor Forbes in the London office of Morgan Stanley, the Bank in 2017 discussed the possibility of transferring functions to cover the market of Russia and CIS from Moscow to office of the financial conglomerate in the UK and Poland.

According to him, the investment Bank is taking a wait and watching the next steps of the United States against anti-Russian sanctions. Interlocutor Forbes, close to the Moscow office of Morgan Stanley, added that the talks on the reduction of personnel in Russia are conducted already for the fourth year: “little Deals, and the costs of maintaining the Moscow office large, also remains uncertainty about further sanctions.”

In 2018, the news came about reducing the presence in Russia of Swiss Credit Suisse, which previously refused to service wealthy clients in the Russian jurisdiction. According to Bloomberg, the Bank decided to close the Department analysts of the Russian stock and stop sales services for local customers. Credit Suisse had already sent on indefinite leave, the head of Department on operations with Russian shares Farhan Kazmi, another reduction. To follow the Russian market (together with Europe, Middle East and Africa) Bank to continue planning of a new trading hub in London. While Credit Suisse says that Russia remains an important market for him. “Changes in our analytical platform is minimal and relate to a small number of shares with a local listing in Moscow”, – said in a commentary for Forbes the investment Bank.

To possible cuts prepared and the Russian branch of the Bank Of America Merrill Lynch, according to two sources close to the Bank. Now in Moscow there are about 100 employees, but until the end of the year, at least a portion of the services can transfer to the London office, said the source Forbes. “Business reasons to be in Russia they are not. Any subsidiary can roll up to Executive office,” – said a former employee of Bank Of America Merrill Lynch, working in a Russian Bank. However, the source of Forbes the Bank Of America Merrill Lynch denies the existence of such plans, of the investment. According to him, the company still considers the Russian market is strategically important and even hires a new staff from Russia. So, one of the senior positions in Bank Of America Merrill Lynch was recently invited by the Manager of the Moscow office of the EBRD.

Desert market

“If before all the big deals – the privatization organization of placements, underwriting – soloed foreign investment banks, after 2014 the number of operational work in Russia, they have declined significantly,” – says EY partner, head of transaction services in the CIS Alexey Ivanov.

The cause is primarily the spiralling of sanctions. For example, the law “On combating the enemies of America by sanctions” prohibits companies and individuals from the United States to participate in offerings by issuers in the sanctions list. “The document is very broad language about the ban on “assistance in helping to attract funding”. Underwriting under such “help” falls”, – cites the example of Ivanov. As in the sanctions lists of the USA and EU are largest Russian borrowers, almost all large transactions related to the placement of Eurobonds, Western players have been replaced by Russian state-owned banks, he said.

Problems from foreign financial institutions in Russia, however, began even before the annexation of Crimea and the imposition of sanctions. The first blow to the business caused by the global financial crisis of 2008, recalls the practice partner for financial institutions KPMG Mikhail Klementyev. “Russia was the real heyday of the investment banking and securities issuance, IPO arrangement and support of M&A – to 2008. Russian banks placed Eurobonds, raising funds for their projects, and give them the money. After the financial crisis, this business has slowed down, and the story around the Crimea and sanctions was an additional factor of pressure”, – said Klementyev.

According to him, in 2014, the business of investment banks was hit by the introduction of sectoral sanctions over Crimea and the situation in the South-East of Ukraine, they cut off major Russian corporations access to funding abroad. “The attitude of market participants to the Russian securities has changed dramatically, the demand for these assets plummeted. It affected capital transactions of Russian banks and enterprises and, as a consequence, all professional providers of investment banking services. Forage base for Western players has decreased,” – adds Mikhail Klementyev.

According to Thomson Reuters, in 2017 the total income of banks operating in Russia, from the full range of services – placement of bonds and shares, support of mergers and acquisitions (M&A) totaled $401.6 million, which was the best level since 2013. However, most of the revenues provided to the Russian players, in particular, “VTB the Capital” ($98,5 million, or 24.5%). In 2016, investment banks have earned $248 million, and in 2015 – $126 million industry Revenue in 2014 was $278 million.

EY and KPMG have noted this year a slight improvement of dynamics and placement of securities, and volume and number of M&A transactions, however, these indicators are still far from pre-crisis levels. Alexey Ivanov indicates a significant imbalance in the M&A market: the potential buyers is much smaller than sellers. “Demand for acquisitions is about one-third of the proposals,” he says. Mikhail Klementyev expects further improvement in the sector M&A: “first, there is now a promising opportunity to buy Russian assets at a discount. Second, from an economic point of view Russia is still a huge market, ignore it is impossible.”

In the coming years investbanka be difficult to work in Russia, Ivanov admits. In his opinion, the share of coverage of the Russian market of foreign offices will increase in all foreign financial companies. Mikhail Klementyev allows another option: the reorientation of Western investment banks on the Eastern investors. “To attract to Russia the players from China and Gulf countries – potential field of work for colleagues-the investment bankers. They are already working in this direction”, – said the financier.

Requiem for a dream

“Working in investment banking in London well, the wages in this sector large, it’s all about what you can dream” – recalled in an interview with Forbes his career in the UK Pavel Matveev, a former trader, who had to collaborate in all a landmark for explorers of the city of London, to Barclays Capital Morgan Stanley and Credit Suisse.

However, to occupy a place in the sun for the Russians all the more difficult. Prior to the sanctions, demand for Russian specialists abroad in investment banking was due mainly to the existence of departments specializing on Russia, explains the practice leader of Kelly Services CIS Evgenia Titova. Western employers required specialists who understand the mentality and the specifics of Russian business, are able to maintain a business relationship, taking into account national peculiarities of clients from Russia.

However, due to the tightening of procedures compliance decreased demand for staff, and many banks began to refuse to work with the Russian resident recognized Titov. “We are now seeing a trend to the return of the specialists, long worked abroad in Russia for a variety of reasons – from the non-renewal of visa to the reduction of projects when the choice is made in favor of local experts”, – the expert emphasizes. According to her, migration financiers abroad remains mainly in the framework of the Russian companies actively engaged in international projects: they prefer to fill positions checked by experts, rather than to bear the risks associated with hiring foreign employees.

Head of direction “financial institutions” recruitment company Hays Daria Anikina agrees that there is a tendency to the return of Russian financiers from abroad to their homeland, but this applies mainly to specialists, who failed to get citizenship or renew a work visa in the host country. In General, the possibility for the Russians to get a job in the financial sector abroad in recent years greatly reduced, stresses Anikin. “This is primarily due to the fact that in many countries have tightened immigration and visa policy. Not every employer is ready to deal with work visa and relocation employee”, – says the expert. In addition, according to Anikina, Russian financiers are quite high requirements on the level of wages and conditions of work, while Western companies are ready to hire the Russians only at a large discount.

The financier from Russia, working in the London office of Morgan Stanley, confirms the conclusions of experts on recruiting: “there is No discrimination of Russians in investbanka no, but they hire much less than before, because the demand for their competence has not yet recovered. Russia is still considered a high-risk market, which may still have to reduce limits”.

However, the demand for professionals of high level is maintained, despite the reduction in investment banking business in Russia and revision strategies Western financial companies in the Russian market, says the managing Director of the staffing company “unity” Felix Kugel. “It all depends on what the person represents, in terms of knowledge, skills, and psychological portrait. If this is the right expert, no one will tell him neither in the US nor in Western Europe or in Australia,” – said the expert.

He notes that there is a demand not only for skilled professionals but also to talented students, even in the face of geopolitical tensions and Russian students to get internships in investment banks on wall street. Do not remain without work and Russians affected by the decline in Western investment companies – often the employer then translates them to its branches in other countries.

Daria Anikina from Hays said that in the last 2.5–3 years the best chance to get a job abroad, particularly in great Britain, Switzerland, Luxembourg, are specialists in private banking, which have their own customer base. They have the ability to move without lowering the quality of life. The most convenient way to do this is to get a job in a foreign Bank in Russia, and then have to go abroad, said Anikin.

Eugene Titov adds that the Russians are still interested financial intermediaries a new generation (FINTECH-projects, financial companies-beginners). “The priority will be experts who are fluent in several foreign languages, you already know the specifics of jurisdictions placing the vacancy and preferably already living in the country,” concludes Titov.

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