Russian investment banks cut jobs as crisis deepens

By Guy Faulconbridge

MOSCOW (Reuters) - Russian investment banks have started slashing staff as a deepening crisis threatens to stall a 10-year economic boom that had made Moscow a honey pot for bankers and traders seeking multi-million dollar salaries.

The crisis has hammered investor confidence in Russia as falls in world prices for oil and natural resources and concerns about record corporate borrowing revived concerns about economic stability, sending equity and bond markets tumbling.

Russian banks, which expanded rapidly over the past decade, have seen trading, investment banking and asset management revenues plunge and bonuses are being minced, bankers said.

Renaissance Group, owner of one of the top local investment banks, may shed about a quarter of jobs, said one person with knowledge of the matter. Troika Dialog, another major local player, may let hundreds go, said a source close to the bank.

"The best bonus you can have in Moscow right now is to have a job at all," said Oleg Galkin, who helps manage $2 billion at Uralsib Financial Corporation in Moscow.

Bankers said the landscape of the market was likely to change as state banks -- such as VEB -- and some foreign banks strengthen their investment banking operations in Moscow.

The booming Russian economy -- where GDP rose to $1.3 trillion last year from less than $200 billion in 1999 -- fueled a bonanza in equity and corporate debt issuance, earning Moscow bankers bonuses on a par with the City of London or Wall Street.

Boom time swagger, however, has been replaced by fear in Moscow banks after the crisis forced even Oleg Deripaska -- ranked in May as Russia's richest man with a fortune of $28.6 billion -- to turn to the state for financial help.

"Brokerages are not making any money and people are being sacked," said one equity trader at a major international investment bank in Moscow who asked for his name not to be used.

"Don't even ask me about bonuses -- people are happy just to have jobs right now," the trader said.

Russia's benchmark RTS index tumbled 10 percent on Tuesday and is now 70 percent down over the past six months.

Investment bankers have a love-hate relationship with Russia's economy, cutting staff during the many crises and expanding to reap the lucrative rewards when times are good.

Many bankers left Russia in 1998 vowing never to return after the government defaulted on $40 billion of debt, unleashing a wave of volatility that lost banks billions of dollars and helped to sink Long Term Capital Management.

But the bankers returned as the economy boomed, attracted by juicy fees for debt and equity sales and scores of mergers as the country's billionaires went on a debt-fueled spending spree.

"When little boys and girls at the investment banks are making $500,000 a year, that is the real crisis," Sergei Galitsky, the chief executive of one market darling and frequent issuer, retailer Magnit (MGNT.MM), told an investor conference.