Investment

U.S. banks' Russian investment banking fee income in doubt after Moscow sanctions – Reuters

Published

3 years ago

February 27, 2022

FILE PHOTO: The logo of VTB Group is seen through a window of Imperia Tower on the facade of the Federatsiya (Federation) Tower at the Moscow International Business Center also known as “Moskva-City”, in Moscow, Russia, in this August 5, 2015. REUTERS/Maxim Zmeyev/File Photo

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NEW YORK, Feb 27 (Reuters) – Western sanctions on Moscow could throw the small but lucrative Russian investment banking business that several large U.S. banks have maintained into question, lawyers said, which could deal a hit to tens of millions of dollars in fees.

Major U.S. banks, including JPMorgan Chase & Co (JPM.N), Morgan Stanley (MS.N) and Citigroup Inc (C.N), have continued to underwrite and advise on Russian deals, often alongside the investment banking arm of state-owned VTB (VTBR.MM). VTB Capital is the largest investment bank by fees in Russia.

But U.S. sanctions placed on Thursday on VTB and Sberbank (SBER.MM) in the wake of Russia’s invasion of Ukraine make the prospect of doing so in the future difficult, lawyers said. That’s only been compounded by the moves to block certain Russian banks’ access to the SWIFT international payment system, announced Saturday. read more

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All the U.S. banks declined comment.

Under the U.S. sanctions, any assets of VTB, including 20 subsidiaries, that touched the U.S financial system would be frozen and U.S. persons would be prohibited from dealing with them. read more

The sanctions against VTB, which one lawyer said were as severe as those placed against terrorist organizations, would raise new reputation and compliance risks for banks doing business in Russia and make it impossible for U.S. banks to work with VTB on any deals, that lawyer said.

“These are very strong sanctions on the financial system,” said Clay Lowery, executive vice president at the Institute of International Finance, a Washington-based bank group.

One of the lawyers who advises financial institutions said the sanctions were “a brick wall,” and for banks there was now a reputation risk of dealing with Russia, even when it is not one of the sanctioned entities.

Ross Delston, a U.S. lawyer and former banking regulator, said that the moves on SWIFT would result in Russia being viewed as “radioactive” by banks in the U.S. and Europe.

Still, some see a future for U.S. banks in Russia despite the measures.

A source familiar with one U.S. bank in Moscow said that they were working out how to apply the sanctions and recognized there would be an impact on how to conduct investment banking business. But the source added that the bank was not considering pulling out of the country.

A source close to another U.S. bank said that even if VTB could not be in deals such as IPOs or M&A, other banks could replace it – as long as those banks are not also subjected to sanctions. That source said the sanctions were not an insurmountable problem for the international banks, adding that there were other segments of the market and sources of revenue for international banks.

VTB said in a statement on Thursday that sanctions had “been a reality for us over the past few years” and the bank has “had time to learn the lessons and prepare for the most severe scenario.” The bank did not respond to follow up questions.

Investment banking business in Russia has been dwindling since 2014, when the United States sanctioned Moscow for invading Crimea. But U.S. banks managed to retain a toehold in the market.

Russia accounted for 0.27% of the global fee pot last year, including advisory and underwriting fees on mergers and acquisitions, equity and debt capital markets. In 2013, Russia accounted for nearly 1% of the fee pool.

Even so, the number translates to sizeable fees. The investment banking arm of Russia’s No.2 bank, VTB Capital, collected $142.9 million – or a third – of the fees earned in Russia in 2021, Refinitiv data showed.

JPMorgan was second overall with $32.8 million, Morgan Stanley fourth, generating $27.3 million, and Citigroup fifth with $22.8 million, while Goldman Sachs was seventh, generating $19.5 million.

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Reporting by David French and Megan Davies; additional reporting by Pete Schroder; Editing by Paritosh Bansal, Marguerita Choy and Diane Craft

Our Standards: The Thomson Reuters Trust Principles.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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