Sunday, 23 August 2009

Russian banking carousel spins once more

Financial News

Jason Corcoran

17 August 2009
Letter from Moscow

The great purge in Moscow’s banking sector is over. Pay and staff were cut to the bone, but wages are now back to near pre-crisis levels, with annual guarantees of $2m to $3m ensuring that the hiring carousel is back in action.

Russian markets have rallied a year after being pistol-whipped by the international credit crunch, and roiled by a five-day war in Georgia, a domestic banking crisis and a series of investor scandals.
Russia’s RTS and Micex stock exchanges have won back trading lost to the London Stock Exchange and have recovered from their 80% plunge in value.

The upheaval caused by the market’s meltdown resulted in the effective nationalisation of brokerage KIT Finance and mid-tier lenders Globex and Svyaz Bank. Renaissance Capital was forced to accept a $500m investment last September from billionaire Mikhail Prokhorov in return for the sale of a 50% holding while Troika Dialog sold a 30% stake to South Africa’s Standard Bank.

RenCap, once the standard-bearer for Russian investment banking, slashed its staff by about half, and Troika by 35%.

Western banks, which had built aggressively in Moscow since 2007, were also forced to retrench as equity and credit markets shrivelled.

RenCap is hiring for selective areas and has increased salaries in Moscow by 20% and in London by 10%, which returns most surviving staff’s pay to pre-crisis levels. Deutsche Bank, the largest foreign investment bank in Russia, said it had never cut wages and had raised them in some departments by 15% to 20% from July 1.

As dealmaking has returned in oil and gas and in pockets elsewhere, owners and country heads are starting to worry about hanging on to their best people. Credit Suisse has fought to retain its sales staff in Moscow after an attempted raid by Goldman Sachs.

The Swiss bank was forced to authorise $2m guarantees after Goldman tried to swoop, according to a source close to the matter.

Goldman, which has struggled to break into the top five in any of the Russian league tables, has been linked with a move for several of Moscow’s best-known rainmakers.

The rumour mill went into overdrive this month after Alfa Bank’s Edward Kaufman had lunch with Chris Barter, co-chief executive of Goldman Sachs in Russia. Kaufman insists the issue never came up and that he is happy to stay at Alfa, where he is taking charge of “a revenue opportunity” to merge the group’s investment bank and the corporate bank. He said its fixed-income and equities divisions had recorded their best two quarters and corporate finance deals were growing rapidly.

At the height of the war on talent in 2007, Kaufman gained notoriety after being hired from UBS for a reputed $15m over two years. Sources close to Alfa suggest Kaufman has in the past few weeks signed a new two-year contract that is more lucrative than the original package.

Goldman is not the only outsider looking to land a senior banker to break into Russian dealmaking. Merrill Lynch has hired a co-head for its global market team in Russia from MDM Bank and is rumoured to be close to be bringing a head trader on board.

Barclays Capital is understood to be whittling down a short list of top bankers to head its expanded business in Moscow.

Swiss bank UBS is close to naming senior hires for investment and private banking while state-controlled VTB Capital continues its build-out into equities following its startling progress this year in debt capital markets.

One leading headhunter said: “The merry-go-round of hiring is back on. It won’t be as dizzy as 2007, but we have more work than we can handle and we are having to partner with other firms.”

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