Goldman Sachs, JPMorgan break up business in Russia

The Goldman Sachs logo appears on the trading floor of the New York Stock Exchange (NYSE) in New York City, New York, US, November 17, 2021. REUTERS/Andrew Kelly/File Photo

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NEW YORK/LONDON, March 10 (Reuters) – Goldman Sachs Group Inc (GS.N)and JPMorgan Chase & Co (JPM.N) On Thursday, they announced that they would dismantle their Russian businesses, becoming the first major US banks to exit after Russia’s invasion of Ukraine and putting pressure on rivals to follow.

Operating in Russia has become more difficult for Western financial institutions due to international sanctions imposed on this country.

While European banks have the most exposure to Russia, US banks still have significant exposure, totaling $14.7 billion, according to BIS data. Read more

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“Goldman Sachs is terminating its business in Russia in compliance with regulatory and licensing requirements,” the bank said in an emailed statement.

“In compliance with the directives of governments around the world, we have actively worked to unlock Russian business and have not pursued any new business in Russia,” GBM said in a statement.

The current activities are limited, JPM said, and they help global clients handle and close existing liabilities, manage risks related to Russia, and act as trustees for clients and take care of employees.

Goldman will end operations rather than exit immediately and any losses will be “non-material,” according to a source familiar with the situation, speaking on condition of anonymity.

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Three informed sources said that in the wake of Russia’s invasion of Ukraine last month, about half of Goldman Sachs’ employees have moved to Moscow or are moving to Dubai. The bank had about 80 employees in Moscow.

The sources said that some of the employees who were transferred will participate in the liquidation process and will work with their colleagues who are still in Moscow.

One of the sources said it is understood that the head of Goldman in Russia will remain in Moscow.

In its annual filing, the bank disclosed its credit exposure to Russia of $650 million.

Shares of Goldman Sachs fell 2.8 percent to $325.97 at midday. As of the close of trading on Wednesday, GS had fallen 12.8% this year.

The largest exposed US bank is Citigroup Inc (CN), which said on Wednesday it was running its Russian consumer business on a more limited basis while sticking to its earlier plans to pull the franchise. Read more

Citigroup has a total Russian exposure of nearly $10 billion, and its chief financial officer has warned that in a “extreme stress scenario” its loss could be half that. Read more

Analyst David Hendler of Viola Risk Advisors said Citigroup may be able to spread the pain of any losses to Russia over several quarters by recording expenses to build reserves on some assets before the losses become final.

“It may squeeze earnings in the next two quarters,” Hendler said.

Other US banks operating in Russia include JPMorgan (JPM.N)She declined to comment on what her plans were.

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Goldman Sachs ranked seventh overall in investment banking income in Russia last year, with Russia’s VTB Capital, JPMorgan in second place with $32.8 million, Morgan Stanley in fourth place with $27.3 million, and Citigroup in fifth place with 22.8 million Million dollars. Goldman Sachs made $19.5 million last year, according to Refinitiv data.

In Europe, Austria’s Raiffeisen Bank International (RBI) is considering leaving Russia, two people familiar with the matter previously told Reuters.

Banks will find it difficult to extricate themselves from the market, however, experts said, as the process takes months or even years. Read more

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Additional reporting by Nikit Nishant in Bengaluru, Matt Skovham and Megan Davis in New York; Additional reporting by David Henry in New York and Bansari Mayor Kamdar in Belgaluru. Writing by Megan Davis in New York; Editing by Will Dunham, Anil de Silva, Mark Porter and David Gregorio

Our criteria: Thomson Reuters Trust Principles.

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