Morgan Stanley pulling out of Russia

RUSSIA / FSU POLITICS - In Brief 08 May 2019 by Alex Teddy
Morgan Stanley has announced that it is withdrawing from Russia due to sanctions. It has been in Russia since 1994. Its banking, brokerage and depositary licenses will be handed over. These business units will then be liquidated. This will be completed in the first quarter of 2020. Morgan Stanley's real estate services and consulting services will be given to a new company that does not need the same type of license. Morgan Stanley is a major loss to Russia. This bank took part in the privatization of Lukoil in 2002 and the IPO of Rosneft in 2004 worth USD 10.4 billion. Large scale Russian companies cannot access capital markets due to sanctions. There is almost no business left for foreign investment banks.The situation is similar to 1998 when several foreign banks such as Merrill Lynch, Goldman Sachs and Lehman Brothers pulled out of Russia. This time Morgan Stanley will be the first to go. It is far from certain that the others will follow suit. A few banks may think that they do not need to keep so many staff in Russia and report as it needed for a banking license because investment is so low. But handing in a banking license is crossing a Rubicon. Once handed in it might be difficult to get it back even if the investment climate is much warmer several years from now.Some banks are staying in Russia in the expectation that some years from now relations between Russia and the West will normalize and investment banking will become majorly profitable again. 2002-08 were the glory years for these banks. The banks still in Russia are retrenching. They are reducing investment banking and focusing on consulting etc... In Q1 of 2019 investment banking was worth USD 32.5 bi...

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