When people think of Wall Street, investment bankers will come high on the list. One of the most profitable firms is Goldman Sachs. In the world of investment bankers, where there is money to be made, you will find an investment banker making a pitch. When the money dries up, they are off to the next deal. For some of the deals are going to be wonderful and profitable to shareholders but many are profitable to the dealmakers. The issue is often times the investor does not know which is which, because a company could be the break through one.
In the US, the IPO market was booming and billion dollar offerings were coming every month. When the market started valuing real profits not just higher sales, one of the consequences is last month no IPO came to market. What is an investment banker to do?
In an article by Niket Nishant, Matt Scuffham, and Sinead Cruise of Reuters, Goldman Sachs is closing their Moscow office employing 80 investment bankers. The bankers will be working out of Dubai. The reason for leaving Moscow is the sanctions the western governments have imposed on Russia and that means very little money is flowing through the economic system in Russia. Overseas funds are frozen and Russian companies are banned at exporting. There is little business to do.
When Goldman Sachs was operating in Moscow, the bank held Russian securities and reported it has a $650 million credit exposure. Goldman was the 7th largest investment bank generating income behind Russia’s VTB Capital is number one, JPMorgan second with $32.8 million, Morgan Stanley with $27.3 million and Citigroup at $22.8 million. Citibank has a $10 billion exposure as it operates a Russian consumer business.
Linking to dividend paying stocks, investment bankers played an important role in the capital markets and they will be anywhere fees are generated. For dividend paying companies, they do not have the need for the IPOs, but a healthy IPO means stock prices are generally up; the companies will have bond issuance and sometimes selling more stock, and selling under performing divisions or divisions deemed not to be core business or buying companies to enhance existing businesses. It is very helpful if there is a strong IPO market, because someone will believe turn arounds are possible, and sometimes they are.
There are more questions than answers, till the next time – to raising questions.