Deutsche Bank has told clients it can no longer guarantee full access to Russian stocks that belong to them, underlining the challenges global investors face to recover stranded investments in the country’s companies.
Germany’s largest bank said in a note dated June 9 and viewed by Reuters that it had uncovered a shortfall in the shares that back the depositary receipts (DRs) the bank had issued before the Ukraine invasion. The shares have been held in Russia by a different depositary bank.
In the circular, Deutsche attributed the shortfall to a decision by Moscow to allow investors to convert some of the DRs into local stock. The conversion was carried out without the German bank’s “involvement or oversight” and Deutsche was unable to reconcile the company shares with the depositary receipts.
It is the first major bank to formally inform depositary receipt holders that they may not get take ownership of precisely all the shares they are entitled to, two sources advising investors who continue to hold Russian DRs told Reuters.
DRs are certificates issued by a bank representing shares in a foreign company traded on a local stock exchange. Swapping DRs for shares in the Russian company is a first step towards an effort to recover their money.
Shares affected include those in national airline Aeroflot, construction firm LSR Group, mining and steel firm Mechel and Novolipetsk Steel. Mechel declined to comment, while the remaining companies did not immediately respond to a Reuters request for comments.
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