BNY Mellon to take $100mn hit to quarterly revenue from Russia pullback

BNY Mellon, the US custody bank, says it expects to take a $100mn revenue hit in the first three months of this year stemming from its decision to pull back from Russia and western sanctions in response to Vladimir Putin’s invasion of Ukraine.

The bank said on Wednesday it would stop accepting new banking business in Russia and would no longer purchase Russian securities. Along with the impact of sanctions, this would “also impact the firm’s annual revenue by an estimated $80mn to $100mm”, it added.

BNY Mellon said it “will continue to work with multinational clients that depend on our custody and record keeping services to manage their exposures”.

The revenue hit is a small portion of BNY’s overall earnings, with the bank reporting revenue for 2021 of $15.9bn. 

But the estimates are the most detailed to date by a large US bank on the revenue hit from a drawdown of operations in Russia. Others, like Goldman Sachs and JPMorgan Chase, have said they are winding down their businesses in the country but have not given an estimate for how much these moves will cost them in lost revenue.

Citigroup has said that it had $9.8bn of total exposures to Russia at the end of 2021 and that in a “severe stress scenario” it could suffer losses totalling a little less than half of that, without giving a timeframe. 

Hundreds of other companies have also curtailed activities in Russia, including tech groups, food suppliers, accounting firms and energy producers.

In Russia, BNY has a representative office in Moscow and has a small number of employees in the country.

The businesses BNY will no longer offer in the country include corporate trusts work, where banks make transactions on behalf of clients; treasury services to help companies manage their liquidity needs; depository receipt services, which are used by foreign issuers on a stock exchange to list securities; and direct lending to companies in Russia. 

New York-based BNY will also stop buying Russian securities through its investment management business, which along with the bank’s wealth management unit has about $2.4tn in assets under management. 

BNY, the 12th-largest US bank by assets according to S&P Global, is in the process of a leadership transition, announcing last week that Robin Vince would take over from Todd Gibbons as chief executive later this year.

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