According to three insiders, Raiffeisen Bank International (RBI), which is under international pressure due to its activities in Russia, is making slow progress with its exit plans. At the same time, profits continue to skyrocket. Are those in charge just buying time?
The schedule given by bank boss Johann Strobl for a possible spin-off of the Russian company is probably not feasible: the target was September. But a decision is still pending. Critics accuse the bank of not seriously pursuing an exit, but hoping the war will end soon.
The bank is under intense pressure from investors, banking regulators and U.S. sanctions officials because of its operations in Russia, which generate billions in profits (see chart below) and are the largest earner. Since the outbreak of war in Ukraine in February 2022, the institute has been exploring possible options, which were reduced to sale or spin-off in the spring.
When asked by Reuters, RBI said it continues to pursue potential transactions that would result in the sale or spin-off of its Russian operations. The bank left unanswered the question of whether the schedule can still be met.
Treasury support
The RBI, which is regarded as the house bank of the conservative governing party ÖVP, is receiving support from politicians. Treasury Secretary Magnus Brunner (ÖVP) spoke to top US sanctions official Brian Nelson in mid-June and promised to cooperate, a person familiar with the situation said.
When asked by Reuters, Brunner said: “Of course this is not an uncomplicated situation and a bank cannot leave such a country overnight”. In addition, he would generally like to see a more differentiated view of the debate. “It is always pretended that only a bank or an Austrian company had remained”.
Billions of euros are tied up in Russia
One of the people said that RBI is mainly concerned with getting the capital of about four billion euros tied up in Russia out of the country. “It may be that the topic of harm reduction sales does not seem realistic anytime soon,” the insider said. There is currently one candidate buyer in particular, but talks are progressing slowly.
It is conceivable that the minority bank will remain or should remain in Russia, the first insider said. The reason for this is the strict specifications of the Russian Presidential Office.
One thing is certain: a spin-off – like a sale – is not an easy undertaking. Negotiations would also be complicated by recent turmoil in Russia following the advance of the Russian mercenary group Wagner into Moscow, disputes between the owners over the future of the Russian company and pressure from the European Central Bank (ECB), which is insisting that the banks withdraw from Russia.
Some state-owned banks against spin-off
A fork is a “very realistic” option, although it would require several approvals, an insider said. However, some of the eight regional Raiffeisenbanks, which together control nearly 59 percent of RBI, would have to oppose each other, as they would then be direct co-owners of the Russian unit.
RBI has provided that in the event of a split, each RBI shareholder would own two shares: one for RBI excluding Russia and Belarus and a second for the Russian operations. The shares of the Russian company will then be listed on a European stock exchange. According to the second insider, it should be possible to sell shares as part of the spin-off. “One can assume that there would then be some change in the ownership structure.”
Meanwhile, according to its own statements, RBI is aiming for a further reduction in activities in Russia. At the beginning of the year, RBI had tripled its profit in Russia from EUR 96 million to EUR 301 million. By comparison, that equates to nearly half of the parent’s consolidated profit.
RBI is seen as a bridge to the West
RBI has been operating in Russia for 30 years and the subsidiary has approximately 2,600 business customers, four million private customers and more than 10,000 employees there. It is the main west bank and is considered a bridge to the west. It is also the home bank of 70 diplomatic missions, including 24 from European countries, according to RBI.
The Italian UniCredit, which, unlike RBI, has not announced a withdrawal, is also still active in Russia. The major Italian bank is also under scrutiny at the ECB. But some American institutions, such as Bank of America, will also remain in Russia.
It is unclear how the investigation by the US sanctions authority Office of Foreign Assets Control (OFAC) will turn out. The Americans sent the RBI a letter in January with questions about payments in relation to Russia and Ukraine.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
