Why is ING cutting equities staff in Russia when other banks are hiring?

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It’s unusual, even in the current difficult climate, to hear of an international bank pulling back from Russia. It’s perhaps even stranger when the redundancies are focused on equities, an area where a number of firms appear to be hiring.

Dutch bank ING revealed that it was cutting 100 staff in its equity markets desk focusing on Central and Eastern Europe. This primarily means that employees in the Moscow office will be affected; while the bank said it would focus on the ‘core’ markets of Belgium, Netherlands and Luxembourg, its Polish equity desk was spared the axe.

ING said that “market conditions remain challenging” in announcing the cuts, but on the face of it, equities appears to be one of the primary areas of growth for banks in Russia currently.

URALSIB Capital, Otkritie, Renaissance Capital and Barclays have all  hired into their Russian equities business in recent months.

However, most of these appear to be betting on growth down the line. Volumes are down currently and, as Reuters points out, Russia’s stocks have underperformed – languishing at a 50% valuation discount compared to other emerging markets.

Prospects look good in the longer term though. VTB Group is anticipating growth of 25% in Russian equity trading volumes next year as the exchange moves to a new Micex-RTS system of settling trades that will bring it in line with international standards. A revamp of the stock exchange is also central to the government’s plan to develop an international financial centre in Moscow.

Struggling international banks under pressure to cut costs cannot gamble on future growth, however, and ING’s need to pay back government aid received in 2008 is likely to have acerbated the need to cut costs quickly. Another example of this is Unicredit, which cut 60-80 equities staff across Russia, Romania, Turkey and Poland in May this year.