By Alexandra Schwarz-Görlich and Tom Sims
VIENNA (Reuters) – Austria’s Raiffeisen Bank International, the largest Western bank in Russia, believes a sale of 60 percent of its business there is the most likely scenario as it tries to withdraw from the market, its chief executive said on Tuesday.
The RBI has been under pressure from authorities on both sides of the Atlantic to reduce its heavy presence in Russia since the war with Ukraine. This is part of efforts to isolate Russia by tightening sanctions on banking and cutting off access to Western goods.
The Vienna-based bank has been saying for more than two years that it will seek to sell or spin off its huge Russian division. But it faces numerous hurdles, not least of which is the likelihood that, like other Western firms that have exited the market, it will be forced to sell off a significant portion of its assets.
“We currently assume that the highest probability is that we can sell around 60 percent, so we will have to keep 40 percent,” bank CEO Johann Strobl told analysts after the bank’s earnings figures were released.
He did not give further details but said it was uncertain whether the RBI would be able to withdraw the funds it generated from Russia. He also said any deal would require approval from Russian authorities, the European Central Bank, the Austrian regulator and the US Treasury Department.
After the RBI announced in April that it was being asked by the ECB to further reduce its business in Russia – as was its Italian competitor UniCredit – Strobl announced that it would stop most new loans and charge high account management fees to reduce the number of depositors.
In addition, deposits will be rejected by all financial institutions that are not subsidiaries of Western banks.
RBI shares rose more than 5 percent after the bank reported a 14 percent rise in second-quarter consolidated profit from the same period last year to 661 million euros ($715 million), beating analysts’ consensus forecast of 523 million euros.
Erste Group Research stated that it was sticking to its positive recommendation and that RBI’s business without Russia was “doing well and remains significantly undervalued”.
RBI generated half of its after-tax profit in Russia in the first six months of the year, but due to Western sanctions, these profits remain with the local subsidiary.
In May, after massive pressure from the US, the RBI withdrew an offer for a 1.5 billion euro industrial stake owned by Russian tycoon Oleg Deripaska. This was part of a plan to release the bank’s funds frozen in Russia.
(1 dollar = 0.9240 euros)
(Edited by Rachel More, Kirsten Donovan, Miranda Murray, Susan Fenton and Kevin Liffey)
