Four years ago, Gary Cohn the president of Goldman Sachs (GS) said the giant investment bank was looking to expand overseas. At the time European banks were struggling and Cohn said he though Goldman could pick up some of their clients as they retreat.
It appears there was less opportunity than Cohn envisioned. And wrestling business away from the European banks, in part because of U.S. regulations has been harder than it appear. And there have been headaches along the way. The latest came from Russia. Goldman is reportedly pulling out of a deal to underwrite $3 billion in Russian debt. A number of European banks are now favored to underwrite the bond deal, which would be the first since the U.S. and its allies imposed sanctions of Russia following the war in Ukraine.
Indeed, the Goldman retreat seems to be inspired by U.S. regulators. There is no explicit ban against U.S. banks doing business with Russia, but U.S. regulators recently told large U.S. banks not to bid on the recent bond deal because it could undermine U.S. sanctions, according to the Wall Street Journal.
Goldman has run into other trouble overseas. Goldman arranged a number of bond deals in 2012 and 2013 for Malaysian investment fund 1MBD, which has been involved in a scandal there involving accusations that the fund transferred hundreds of millions of dollars to personal bank account of Najib Razak, Malaysia’s prime minister. In January, the Goldman banker at the heart of those deals went on personal leave.
Overall, Goldman’s earnings in its European operations have risen just 4% since the end of 2013. At the same time, its loan exposure has dropped 4% since the end of 2012. Of course, with interest rates around Europe in negative territory, Goldman may be glad it didn’t do better in winning business overseas. At the same time, overall revenue for the bank is down 2% in the past two years. Wall Street’s plans to boost its revenue by growing overseas, at least so far, hasn’t paid off.