Western banks in Russia are pulling out and with thousands of staff in the country and billions in assets, their exits are likely to be drawn out and costly. While Citigroup, JPMorgan, Goldman Sachs and Deutsche Bank started off a growing trend to unwind their Russian-based business, workers are faced with a dilemma – to risk their jobs by leaving or stay in an increasingly tense and overbearing country at war.
“Most local investment bankers have already left the country for different reasons, mostly because they fear a war regime will be introduced and people will be prohibited from leaving the country”, said one dealmaker at a western bank in Moscow who declined to be named because of their employer’s rules and security concerns. “There’s no banking activity right now. Some people are just leaving to get some rest. Others just keep panicking.” Around half of Goldman Sachs’ 80 Russian-based staff had already relocated to Dubai before the bank had stopped operating in the country last month. JPMorgan did the same and is also considering relocations by concerned staff in the country, according to a person familiar with the matter.
There’s still little clarity about what exactly a wind back really means. Banks run complex operations that are often deep within the market’s plumbing – extracting themselves from loan obligations and multi-layered transactions could take months. Also, while banks are notoriously quick to sack staff at the slightest sign of a downturn, few have rolled out formal redundancy programmes in Russia yet.
Morgan Stanley is also considering offering relocations to its 20 staff in the country, Bloomberg reported. “Most Russians don’t support this decision but all of us have to suffer the consequences”, said another banker working for a local institution. “I wanted to leave before all this happened, but now my desire to go has just skyrocketed.” Another dealmaker who has worked at several US banks in Russia said he left the country shortly after the Ukraine conflict broke out on February 24 . “Most people in the financial sector are trying to flee”, he said.
“The sector has been knocked down. Everyone is sitting on their hands doing nothing. Everyone is packing their stuff and trying to get out.” Kremlin-backed news agencies churn out state propaganda, but some banks have international news networks broadcast into their offices through internal networks. Dealmakers say that this is influencing their decisions to get out.
“Most of the people here are not being constantly brainwashed by Russian propaganda and feel ashamed at what’s going on with Ukraine and their country, too”, said one of the dealmakers in Moscow.
The $417m in fees brought in from Russia deals in 2021 is a tiny fraction of the $130 bn hauled in during a record year for investment banks that year. Quitting Russia is a relatively easy choice for investment banks.
For others, it is more complex. Deutsche Bank has said that it is not going to shut its 1,600-strong technology centre as part of its withdrawal from Russia. That centre employs the vast majority of its staff in the country.
Citigroup has 3,000 employees and a retail network with 500,000 customers there, which it was aiming to sell ahead of the conflict. In a statement last month, the bank said it was “moving with urgency to complete our assessment of our operations in Russia” and is starting to scale back.
In the short-term, Russia’s banking sector is facing a brain drain. “I had three job offers on the table before the conflict, two of them in Russia, but they were all suspended”, said one of the dealmakers. “It just makes sense to get out.” Another banker who is trying to secure a visa to the UK said: “Job prospects are complete trash. I’ll do anything to get out.”
Andy Jalil
The writer is our foreign correspondent based in the UK
