Austria’s Raiffeisen expects ECB to order acceleration of its Russia exit

Austria’s Raiffeisen expects ECB to order acceleration of its Russia exit

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Austria’s Raiffeisen Bank International said it expected to be ordered by the European Central Bank to speed up its withdrawal from Russia, in a move that could derail talks to sell its highly profitable division in the country.

RBI, the largest western lender still operating in Russia, has come under mounting criticism for not having done enough to scale back its business, following the beginning of Moscow’s full-scale invasion of Ukraine in February 2022.

The ECB’s new stringent proposals “go far beyond RBI’s own plans” and may “adversely affect” ongoing attempts to sell its Russian arm, the bank said in a statement on Thursday.

Raiffeisen has been in talks to sell its Russian business with two Russian counterparties for more than a year — with little sign of progress on either side so far.

RRI’s Russian arm manages assets of just under €21bn, according to the latest figures. Its book value was estimated at €4.1bn in figures published last year. Restrictive laws put in place by the Kremlin mean RBI is unable to repatriate profits from the country and must have presidential approval for any sale of its Russia business.

RBI has sought to defuse increasing western pressure by scaling back its lending. The bank has undertaken a 56 per cent decrease in its corporate loan book in the country over the past two years.

Profits have continued to pour in, however, as it has picked up depositors and client relationships from other exiting western lenders. Its employee headcount in Russia has increased since 2022, and the division is now the single most profitable part of its international network, responsible for half of all earnings last year.

The Financial Times reported earlier this week that RBI had been posting dozens of advertisements for Russia-based jobs indicating ambitious plans to grow in the country, in an apparent contradiction of its commitment to scale back operations.

“RBI expects to be asked by ECB to further reduce its business activities in Russia to a very large extent,” the bank said. “We understand that this is a measure to implement the strategy announced by the ECB to reduce the exposure of European banks to Russia. RBI will carefully analyse the requirements placed on it.”

The ECB’s draft proposals contain a requirement for a further 65 per cent reduction in RBI’s Russian loan book from its current level, and a corresponding decrease in its international payments business.

The Austrian lender is also under scrutiny by US officials. Washington has repeatedly asked for RBI to share information with it over its ongoing activities in Russia.