Investment Banking in Russia

Updated on May 2, 2024
Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

Overview of Investment Banking in Russia

Have you ever heard about investment banking in Russia? How is the market? Can anybody get a job there as an investment banker? How is culture? What types of deals are more prevalent? And how much salary of investment banking in Russia can you expect? What is the recruitment process like?

This article will try to answer all of the above questions. But, first, let us look at the sequence of the article.

In this article, we will talk about the following: –

If you are new to investment banking, look at the nuts and bolts of investment banking here.

Investment Banking in Russia

Most bankers have rarely heard about investment banking in Russia. But it exists, and you need to fight to get a good position in a bulge bracket bank in Russia.

Before 1990, there was no investment banking in Russia. It all began after 1990 when Gazprom went public. The year was 1996 when the investment banking industry in Russia found its first route.

Before 1996, the mentality in Russia was completely different. If anyone needed M&A advice, they would not have gone to investment bankers. Rather, they would go to a commercial bank, talk to them and get a loan. As a result, investment banking in Russia did not grow at all.

The investment banking industry has started in Russia, but still, M&A deals are less. In a given year, if you ask an investment banker in Russia about what arrangements he has been handling, he would say – equity capital market deals such as IPOs. Investment bankers rarely control M&A deals.

In a given year, if we look at the Russian investment banking market, we will see that 70%-80% would be in the capital market, and the rest of the deals will come from M&A advisory.

But why are there so lesser deals in M&A advisory? The reason is that the state or oligarchs control many M&A deals. Oligarchs are the people who are very rich and have some political influence. As a result, it is not easy to negotiate with them. Thus, companies do not intend to do M&A deals since they have been controlled by political pressure, not by institutional and individual investors.

On the other hand, if we look at equity capital deals, we see that many private companies like to become public. And as a result, the investment banks get a lot of opportunities to close these deals. Unfortunately, however, politics affect arrangements a lot. And the capital markets are often completed in Russia.

So, in a nutshell, investment banking in Russia is on the verge of growing. But politics has a drastic effect on the growth of the market. Nevertheless, we can hope investment banking in Russia will gradually grow toward a better future as the economy grows.

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Services Offered by Investment Banks in Russia

As you have seen, investment banking in Russia has struggled to keep its feet stronger; few banks have been doing well. We will try to understand their focus and service orientation below.

First, we will look at the services offered by these investment banks in Russia: –

Investment Banking in Russia

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Capital Market

As already mentioned, the investment banks in Russia have been closing most of the deals in the capital market. They offer extensive services in the capital market and have world-class teams to back them up. Here are a few of the top-notch services they offer: –

  • Precious metal trading: These banks buy precious metals (gold, silver, platinum, etc.) on behalf of their clients and offer them to those in finance, precious metal trading, and unallocated metal accounts for corporations.
  • Brokerage services: Investment banks in Russia also offer brokerage services. They offer MICEX to help clients with corporate bonds and shares, sovereign bonds, and Russian depositary receipts. RTS (FORTS) assists clients in futures and options on bonds and shares issued by top-notch Russian companies. And they also offer services in the OTC market.
  • IPO and underwriting: Investment banks in Russia offer Initial Public Offerings (IPOs) and Secondary Primary Offers (PMOs), and they are highly skilled in these areas. The top investment banks in Russia help companies get full support during the whole transaction; they also place them among the vast foreign investors base and list them on international and Russian stock market exchanges.

Debt Financing

Investment banks in Russia also offer a wide range of services in debt financing. They provide the following services under debt financing: –

  • Issuance of LPN Eurobonds/CLN
  • Issuance of ruble stock bonds
  • Issuance of ruble corporate bonds
  • Issuance of ruble bank bonds
  • Issuance of ruble bonds for Russian constituencies and municipalities.

Also, check out Equity Financing vs. Debt Financing

Corporate Finance (M&A Advisory)

Top-notch investment banks offer M&A advisory services even if Russia is not very popular for M&A deals. They help clients build the strategy and structure of M&A deals. They also assist clients in lead management, investor search, private placements financing, mergers and equity stake swaps, and advisory services.

Now, we will talk about the service orientation of these investment banks in Russia.

  • These top-notch banks are the most adored investment banks in Russia since they have years of experience (around 20+ years) in serving their clients in Russia and the international market.
  • These banks also have great networks, and their clients can access a great pool of international investors because of their connections.
  • If any client wants to test the supremacy of these banks, they can go through a series of large-scale investment deals the banks have executed to ensure superior service.
  • These banks usually hire the best people to build the greatest teams. Investment banking is not for the faint-hearted, and the teams are extraordinary.

List of Top Investment Banks in Russia

Yes, Russia is not a perfect place for investment bankers. But here is the list of top investment banks that have made their presence felt.

Let us have a look at them one by one: –

  • Alfa-Bank JSC(Alfa-Bank)
  • Aton Capital
  • Bank of Moscow
  • BNP Paribas S.A.
  • Center-Invest Bank
  • Citigroup Inc.
  • Credit Suisse Group AG
  • Gazprombank
  • Metallinvestbank
  • Morgan Stanley
  • Palbank
  • Renaissance Capital
  • Rosneft
  • Royal Bank of Scotland PLC
  • Sberbank
  • Troika Dialog
  • UBS AG
  • VTB Capital
  • Zerich Capital Management (ZCM)

Recruitment Process

The recruitment process in investment banking in Russia is not much different. But of course, there are a few unique things in the process that we should know. Let us have a look at the recruitment process for investment banking in Russia: –

  • Networking: As you already know, making one’s mark without networking would be impossible. In Russia, the recruitment process is mostly random; that is why you need to do an extraordinary amount of networking. Only cold calling or cold emailing will not hit the nib. You need to attend the events sponsored by business clubs, talk to as many head-hunters as possible, and then look for internships.
  • Internships: Here in Russia, the meaning of internships is different. You cannot just get anything in 6 weeks to 12 weeks of internships. It would be best if you were ready for internships of at least six months to a year. Imagine being in investment banking as an intern, doing the job of an investment banker, receiving chicken feeds, and working 100 hours a week for a year. It is not easy for most people. But few people are ready to pay the price to get into investment banking. As the team is much smaller than the other parts of the world, barriers to entry are much more than usual. Also, have a look at how to get an investment banking internship.
  • Planning to enter into investment banking: You must carefully plan into the Russian investment banking market. Here is why. The competition is tough, and many people aim for a single position since the team is always very small. So you should know that you will be entering into investment banking when you are in your graduation. And when you are in graduation, you need to roll up your sleeves and start searching for internships. Your target would be at least 2-3 internships before you become a graduate. Internships can be of any nature – in commercial banking, in investment banks directly, or in antitrust regulators where M&A deals are being approved.
  • Interviews: If you follow the above steps, you may be ready for interviews. To be eligible for the interviews for a full-time job, you need to have the relevant qualifications, and you should know a few big shots in the industry. The interview questions are the same, and you need to go through the online application, assessment centers, numerical questions, and case study analysis. In technical interviews, you will be asked questions like DCF valuation, various valuation methodologies, linking three financial statements, calculating beta, etc. Investment banks in Russia only hire 3-4 people a year, often less than that. That is why the only way to stand out is to pursue additional qualifications like CFA, network extensively, and be always ready for internships before getting a full-time job.
  • Entry-point as a foreigner and language: It is almost impossible to get a job in investment banking in Russia. Back in 1990, things were different. Russian investment banks at that time needed to hire people from foreign countries as Russian people were not having the required qualifications for investment banking. Over time things have changed. Only Russian people get hired here. The only foreigners who work in investment banks in Russia are at the MD level. That means without knowing the native language, you have no chance.

In a nutshell, getting into investment banking in Russia. It would be best if you did a lot of work before you ever can see the light of the day.

Culture in Investment Banks in Russia

The work pressure is huge even if the Russian investment banking market is emerging. As a first-year analyst, you must work 80-100 hours weekly. And you would be expected to perform since the team is very small and only 10-15 people support an entire region. But in the summertime, the working hours become a little less stringent. Because during August, people take vacations and go on holiday. The pressure of work becomes less. That is why investment bankers work around 60 hours a week during summertime.

As an analyst, you need to attend many external and internal conference calls throughout the day because the bankers need to discuss every move with their clients. And all the calls should end before 6 p.m. because no employee at any corporation stays in their organization beyond that time.

The work is usually split among three key areas – administrative work (20%), Excel and modeling (30%), and power-point (50%).

Salaries of Investment Banking in Russia

The best thing about working in Russian investment banking and the investment banking salaries in Russia. It is as good as New York or London. So, it makes sense why people work so hard to get into investment banking.

Let us have a look at the average salary of investment bankers and analysts: –

Investment Banking in Russia

source: glassdoor.com

In investment banking in Russia and getting a higher salary, you would save a lot more because the income tax rate is just 13%. After paying the income tax, the rest, 87%, is yours, which is a lot compared to New York or London.

And you will also earn a great bonus. As an associate, you will earn almost 1.5 times your salary bonus in your first year. And the salary and extra are all performance-oriented.

But in boutique banks, the basic compensation and the bonus are much lesser.

Exit Opportunities

Rarely do people leave investment banking in Russia for other options. The reason is a high entry barrier in investment banking. People work hard to get into investment banking, and most do not look for other opportunities without working for a long time.

However, if you are looking to explore new opportunities and are not very interested in investment banking, your only option can be a corporate development career. Private equity is in its infancy here – just ten firms hire people. And even hedge funds are also not very prevalent.

Also, have a look at Investment Banking Exit Opportunities

In the final analysis

Investment banking in Russia is not a great market to try your hands on. But, if you are from Russia, you have a chance to try your luck. Else, you need to have years of experience in investment banking to make your mark.

This article is a guide to Investment Banking in Russia, services offered, top investment banks list in Russia, recruitment, salaries, and job opportunities. You may also have a look at these articles below to learn more about investment banks: –