The Russian subsidiary bank of the American JP Morgan Chase, which announced the winding down of its activities in the country back in March 2022, based on the results of January-September 2023, became the first in terms of assets among foreign investment banks in the Russian Federation. The bank's assets as a whole have more than quadrupled in two years. Experts believe that the growth of assets and liabilities is associated with the participation of the investment bank in conversion and swap operations. In their opinion, American banks in the current conditions, in general, “are less afraid of secondary sanctions than European ones.”
According to RAS reporting for the first nine months of 2023, J. P. Morgan Bank International,” a subsidiary of the American credit organization of the same name in the Russian Federation, the volume of its assets increased by 48%, exceeding 203 billion rubles. In 2022, the figure also increased - almost 2.9 times, to 137.1 billion rubles. The bank's liabilities have increased almost 12-fold since the beginning of 2022 and amounted to RUB 180.3 billion at the end of the third quarter of the year. (since the beginning of 2023, their volume has increased by 54.5%).
Among the subsidiaries of other foreign investment banks in Russia, positive, although to a lesser extent, asset dynamics were shown by Natixis Bank (growth by 16.5% in January-September), Credit Suisse (Moscow) (by 13.85%) , BNP Paribas (by 5.2%).
The rest of the foreign investment banks predominantly reduced their assets. The overall decline, according to Kommersant’s calculations based on bank reports under RAS, amounted to 4.5–40%. The leader of the fall in absolute terms was ING Bank Eurasia, owned by the Dutch financial group ING Group. Its assets decreased by 40%, to 147.8 billion rubles. versus 125% growth in 2022. ING Bank's website states that it "continues to cooperate with international clients in Russia, but has suspended new business with Russian companies." As a result, the bank lost its position as the largest foreign investment bank in Russia by assets to J. P. Morgan jar.”
According to the reports of J. P. Morgan Bank,” the bulk of its assets (about 80%) are accounted for by classified accounting lines, which Russian credit institutions may not disclose by decision of the Central Bank. For example, currently banks do not publish the volume of derivative financial instruments (DFIs), investments in subsidiaries and affiliates, as well as “other assets” in their reports under RAS. If we summarize and analyze the “unclassified” accounting lines of “J. P. Morgan Bank,” they experienced a more than threefold decline.
The Russian bank and the American JP Morgan Chase did not respond to Kommersant’s requests. JP Morgan Chase was among the first to announce back in March 2022 that it was curtailing its business in Russia. In its reporting, the bank emphasizes that it has introduced “control measures to reduce the risk of non-compliance with sanctions and prevent transactions with sanctioned persons and their property.”
Financial expert Olga Ulyanova believes that in conditions of limited access of Russian financial institutions to the foreign exchange market, American banks can participate as counterparties in conversion transactions and ruble-dollar swap operations. “From the point of view of servicing commercial clients, investment banks are not key players in the market, but they can provide consulting and settlement services, including for foreign companies that have decided to continue business in the Russian Federation or have not had time to leave the local market,” explains Ms. Ulyanova.
Banking expert Alexey Nechaev believes that the growth of the balance sheet of J. P. Morgan Bank" in terms of assets is explained by an increase in balances on nostro accounts (correspondent accounts) in other banks, and in terms of liabilities - in the accounts of non-resident clients of the Russian Federation. It is these positions, judging by the turnover sheet, that formed the majority of investments and liabilities in 2023.
“Moreover, the listed items of the published balance sheet form of J.P. Morgan Bank (from the 806th reporting form.— “Kommersant”) for nine months do not fit with the indicators of the turnover sheet disclosed on the regulator’s website (101st reporting form.— “Kommersant”),” says the expert. In particular, from the latter we can conclude that as of October 1, the bank held 161 billion rubles in correspondent accounts, but in the published form of its balance sheet this amount decreased to 1.2 billion rubles. “In addition, approximately the same amount of balances on the accounts of non-resident clients “disappeared” somewhere in the published balance sheet, but attracted funds from credit institutions in the amount of 161 billion rubles appeared, which cannot be found in the bank’s balance sheet on the regulator’s website,”— Mr. Nechaev clarifies.
According to the expert, the bank’s management could reclassify in the published statements part of the claims against banks and balances on current accounts into “other assets” and “other liabilities” due to “blocking or other reasons.”
The growth of assets of banks such as JP Morgan in Russia “does not look strange,” says Ms. Ulyanova. In her opinion, “American banks are much less afraid of secondary sanctions than European ones.”