Western banks weather post-sanctions slump in Russian dealmaking
By Sujata Rao
LONDON Nov 13 (Reuters) - Western banks have seen their fees from Russian deals collapse as sanctions squeeze once-lucrative bond and equity business, but buoyant demand elsewhere has already pushed fees from emerging market clients 10 percent higher than 2013's levels.
A tit for tat round of sanctions between the United States and Europe and Moscow over Russia's involvement in eastern Ukraine has seen capital raising by Russian companies forced to a virtual halt. Just $10 billion was issued in new debt for instance, a fraction of what was sold last year.
As a result, investment banks' income from syndicating Russian debt sales and share listings in 2014 stands at just over $100 million, a quarter of 2013 earnings and the lowest since 2004.
Adding fees from loans and merger/acquisition deals, they have made around $350 million - less than half last year's total as the following graphic based on ThomsonReuters data shows:
Those sums might look like small change for global banks. But every dime counts these days for lenders slammed by multi-billion dollar fines from regulators, an increasingly tight leash on once-booming forex markets and slow European growth.
The Russian deals business earned banks over $8 billion in fees over the past decade, nearly a tenth of their total emerging market business relating to capital raising or mergers and acquisitions.
But now sanctions prohibit Western investment banks from helping Russian companies deemed to be complicit in the Kremlin's Ukraine policy to raise capital and investors from the United States, EU and several other countries are not allowed to buy new securities from those firms. Continuación...