Billions at stake: Wall Street scrambling for the exit

For decades, global finance firms eagerly catered to Russian firms, billionaires and the government. Then tanks started rolling into Ukraine.

Citigroup, which has thousands of staff and billions of dollars of assets in Russia, has said it will cut back much of its business in the country. Goldman Sachs Group, JPMorgan Chase & Co. and Deutsche Bank are also heading for the exit, with some financiers relocating to other hubs such as Dubai. They’re being followed by lawyers and other professionals.

It’s perhaps the harshest and fastest exclusion in living memory of a major industrialised economy. The past few weeks have been a frantic dash to understand and implement sanctions that are being continually updated by jurisdictions including the US, UK and the European Union.

The result is once-bustling desks have ground to a halt, and not just in Moscow. Traders have been left stuck with Russian shares and bonds they can’t shift, while derivatives linked to them have been left in limbo. Private bankers to now-toxic Russian billionaires are drumming their fingers as their clients struggle to pay the cleaners in their London mansions.For the finance industry, billions of dollars are at stake.

A dozen lenders including Raiffeisen Bank International, Citigroup and Deutsche Bank have about $100 billion of combined exposure to Russia, according to data compiled by Bloomberg. Firms have stressed, though, that their balance sheets can easily absorb any hit to their Russian businesses.

In the hours after Russian troops entered Ukraine, Moscow’s financiers watched the effective collapse of businesses that until last month had looked in rude health.

One local investment manager, who asked not to be named, said he was woken by colleagues and raced to the office that morning. His company had been handling $6 billion for pension funds, but now he believes his clients’ assets are likely worth just a fraction of that and perhaps nothing at all.

Another manager in charge of a group of Moscow-based traders, who also spoke on condition of anonymity, said activity levels on his desk had fallen by three-quarters as foreign brokers ceased dealing with his firm. He said he hoped to pick up business others left behind when they quit Russia.

Staff at VTB Bank, which has been sanctioned by the US and had its British unit frozen, are finding it all but impossible to get many Western firms to return their calls and emails, according to one person with knowledge of the situation.

This has left investment bankers struggling to close out trades with counterparties. Some firms kept in touch with VTB, Russia’s second-biggest bank, and have largely managed to untangle their outstanding trades, sources said. Many others severed ties once the sanctions were announced.