Goldman Sachs Allowed to Exit Russian Market

A week after ING Groep NV, the Dutch multinational banking and financial services corporation, announced closing its operations in Russia, Wall Street bank Goldman Sachs, which has had a Russia presence since 1998, has been permitted by Russian President Vladimir Putin to sell its business and leave the country.

The New York headquartered Goldman Sachs had to wait for nearly three years to exit Russia after the latter’s full-scale invasion of Ukraine in February 2022. The Russian government approved the sale of Goldman Sachs business to Armenian investment firm Balchug Capital for an undisclosed sum.

Following the international sanctions imposed on Russia by the US and its allies in the Europe in 2022, the multi-national financial institutions such as Goldman Sachs and Citi Group were banned from selling their shares without the approval of Putin.

According to a Bloomberg report, among all US banks, Citi Group has the largest total exposure to Russia and despite Citi announced its plans to exit retail banking in Russia, it still has $9 billion tied to Russia. Armenian firms have become common middlemen between Russian and Western markets, following the sanctions, Bloomberg added.

Meanwhile, Financial Times has reported that Balchug Capital, which was founded in 2010, has closed at least three deals to purchase Western businesses pulling out of Russia.

ING Sale                      

ING said it was selling its Russia business to a local company Global Development, owned by a Moscow-based financial investor with a background in factoring services paving the way for its exit from the country.

Under the terms of the agreement, Global Development will acquire all shares of ING Bank (Eurasia), taking over all Russian onshore activities and staff. Global Development intends to continue to serve customers in Russia under a new brand.

The transaction, which has been preceded by extensive due diligence, is subject to various regulatory approvals in the EU and is expected to be closed in the third quarter of 2025.

Since February 2022, ING has taken on no new business with Russian companies, has scaled down operations and has taken actions to separate the business from ING’s networks and systems. At the same time ING’s total lending exposure to Russian clients has been reduced by more than 75%.

ING expects a negative P&L impact of around $727.54 million post tax. This includes an estimated book loss of around $415.74 million, representing the difference between the sale price and the book value of the business, which would have a negative impact of around 5 basis points on ING’s CET1 ratio.

It also includes an estimated negative impact of around $311.80 million from recycling the currency translation adjustment through P&L, that is currently booked in equity for past changes of the value of ING Bank (Eurasia) as a result of exchange rate movements.

This currency translation adjustment recycling will not affect ING’s CET1 ratio and resilient net profit, ING said.

After the transaction, ING will continue to further reduce its offshore exposure to Russian clients. This exposure, which is booked by other ING entities outside of Russia, amounted to $1.04 billion as of 30 September 2024.