Following Russia’s invasion of Ukraine, JPMorgan Chase & Co (JPM.N) and Goldman Sachs Group Inc (GS.N) on March 10 announced that they were suspending their Russian businesses, becoming the first major U.S. banks to exit and putting pressure on rivals to follow.
Due to international sanctions against that country, Western financial institutions have found it harder to operate in Russia.
According to Bank of International Settlements (BIS) data, while U.S. banks still have significant exposure, totaling $14.7 billion, European banks appear to be the most highly exposed to Russia.
In an emailed statement, the bank said:
“Goldman Sachs is winding down its business in Russia in compliance with regulatory and licensing requirements.”
On their part, JP Morgan said:
“In compliance with directives by governments around the world, we have been actively unwinding Russian business and have not been pursuing any new business in Russia.”
Current activities are limited and the bank is assisting its global clients to manage Russian-related risk, address and close out pre-existing obligations, act as a custodian to clients and take care of employees.
According to a source familiar with the situation, speaking on condition of anonymity, rather than exiting operations immediately, Goldman will wind them down and any losses would become “immaterial”.
Around half of Goldman Sachs employees in Moscow have moved or are moving to Dubai, in the aftermath of Russia’s invasion last month of Ukraine, three sources familiar with the matter said. In Moscow, the bank had around 80 staff members.
The sources said that some of the relocated staff will be involved in the winding down, working with colleagues still in Moscow.
One source said that Goldman’s Russia head is believed to be remaining in Moscow. The bank, in its annual filing, had revealed a credit exposure to Russia of $650 million.
In midday trading on Friday, Goldman Sachs’ shares dropped 2.8% to $325.97. Goldman Sachs had fallen 12.8% this year, up to the close of trading on Wednesday.
Citigroup Inc (C.N), the biggest exposed U.S. bank, is operating its Russian consumer business on a more limited basis while sticking with its previous plans to divest the franchise. The total Russian exposure of Citigroup is nearly $10 billion and in a “severe stress scenario”, its chief financial officer warned, its loss might be half that.
Through recording expenses to build reserves on some assets before the losses are final, Citigroup can spread the pain of any Russian losses over several quarters, according to analyst David Hendler of Viola Risk Advisors.
Handler said:
“It might put pressure on earnings for the next couple of quarters.”
JPMorgan (JPM.N) is among other U.S. banks operating in Russia, and it declined to comment on what its plans were.
In general, Goldman Sachs was seventh in generating investment banking income in Russia in 2021, with Citigroup fifth with $22.8 million, Morgan Stanley fourth with $27.3 million, JPMorgan second with $32.8 million, and Russia’s VTB Capital top. According to Refinitiv data, last year Goldman Sachs generated $19.5 million.
Previously, two people with knowledge of the matter told Reuters, in Europe, Austria’s Raiffeisen Bank International (RBI) is considering leaving Russia.
Experts have said that banks will find it hard to disentangle themselves from the market, however, with the process taking months or even years.
