Jason Corcoran in Moscow -
Sberbank CIB's London business more than quadrupled its losses in 2014 as sanctions over Ukraine led to many investors avoiding working with the Russian investment bank. The hit was then compounded this April by an almost $5mn sexual discrimination award against the division.
The UK investment banking unit of Russia's largest lender posted a £4.93mn loss last year compared with a drop of £894,000 for 2013, according to filings made in late August with Companies House.
The firm's parent Sberbank, sanctioned by the EU and US last year over Russia's involvement in the Ukraine conflict, postponed its annual investor forum in Moscow in April and has been cutting its headcount in both London and Moscow as trading has dried up.
"For many clients, the backdrop of the sanctions has led to a soft embargo where its regarded more prudent to avoid transacting in Russia markets or with Russian-owned counterparties than to risk falling foul of the sanctions framework," Paolo Zaniboni, chief executive of Sberbank CIB in the UK, said in the filing.
Sanctions against Sberbank and its state rival VTB Group do not prohibit clients from trading with them. But they do restrict investors from accessing debt and equity financing from these lenders with a maturity of longer than 30 days.
Zaniboni said lower staff costs last year were reduced further this February "through a reduction in headcount".
The executive noted a "reorganisation of key management positions" since cutting the balance sheet is regarded as "an appropriate and proportionate response" to the sanctions environment and Russia being perceived as a difficult market to operate in.
The firm recently cut seven bankers in its London office, trimming its staff there to about 40, according to a person familiar with the situation. Salaries were slashed last year to £8.6mn from £13.3mn, the filing shows.
"The geopolitical events in Ukraine and the ongoing impact of US and EU sanctions have had a significant impact on our trading volumes, particularly during the second half of the financial year," Zaniboni said. "Turnover across the business was directly affected, reflected in the 46% year-on-year reduction."
Slammed in harassment case
The bank's UK business has also been hit by a sexual discrimination scandal involving former employee Svetlana Lokhova. An employment tribunal in April awarded the former saleswoman £3.2mn ($4.9mn) after finding she had been a victim of harassment, victimisation and discrimination amounting to constructive dismissal.
Lokhova was nicknamed "Crazy Miss Cokehead" and "Miss Bonkers" by her London colleagues and was driven to a mental breakdown, the tribunal ruled. Among other slurs that featured prominently in the subsequent case, workmates branded her "chemically dependent" and told her she had only been hired because of her chest measurements.
In one email, her line manager, who later accepted the drug allegations were untrue, told a client: "We are all quaking here - awaiting arrival of Ms Cokehead in a puff of sulphurous smoke."
Lokhova, who earned more than £750,000 a year in salary plus bonuses, was so "incensed and appalled" by the insinuations that she took a drug test during the hearing, which turned out negative.
In the Sberbank unit's prior year’s filing which was only submitted last month, the legal counsel said that any liability would be "of limited financial impact", in sharp contrast with the final ruling and award to Ms Lokhova, a Cambridge graduate who now researches Soviet and Cold War history.
Still spending as rivals save
Adding to the financial burden of the year, the firm said it has entered into contracts to refurbish its offices on 85 Fleet Street to the value of $2.4mn.
Meanwhile, VTB Capital, which has a much larger presence in London, has also been reducing personnel. Simon Cose, head of commodities trading, and Marcus Joachim, a trader, have both been listed as inactive since May, according the UK Financial Conduct Authority register. The firm posted a loss of $92.2mn last year compared to a profit of $4.1mn in 2013, according to a UK regulatory filing on May 1.
Alfa Bank, controlled by billionaire Mikhail Fridman, has cut its London trading office to a skeleton staff. BCS Financial, owned by Siberian banker Oleg Mikhasenko, is hiring for equity sales in London but is moving some back office functions to Moscow to save costs, according to head of equity sales and trading Luis Saenz.
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