Raiffeisenbank International (RBI) has generated almost half of its annual profits in Russia so far, even as the bank has scaled back its operations there. The announced complete exit from the lucrative Russian activities is further postponed.
In the first three quarters of 2023, RBI made a profit of 2.1 billion euros, the group announced on Friday. Almost half of this, one billion euros after taxes, was realized in Russia.
The capital is tied up
However, the money is stuck there because the Kremlin strictly controls the outflow of capital to strengthen the ruble. Raiffeisen continues to roll out plans on how it can achieve a strategic exit from Russia while getting out the capital stuck there. According to an insider, this amounts to around four billion euros. Negotiations have recently been held with two Russian institutions, the Financial Times reports, citing an executive. However, these discussions are stagnating.
RBI is the largest Western lender still operating under Putin’s regime. Criticism that the exit plans are progressing slowly is growing. In response, the bank announced on Friday that it had cut lending in Russia by 30 percent since January. In addition to shrinking Russia’s loan portfolio – which now stands at 6.3 billion euros – Raiffeisen has also scaled back its payment transactions business and ended relationships with local banks.
Exit in 2023 “very unlikely”
However, the complete spin-off of the Russian company – or a sale – is still postponed. After clearly missing the first target in September, an exit by the end of the year was now said to be “highly unlikely”. RBI’s CEO explained on Friday that a sale would provide “a clear, perhaps easier way out” of Russia. But the spin-off is still an option. However, he did not want to commit to a time frame for this: “We are dependent on numerous approvals from the Russian and European authorities and can therefore only influence the pace to a very limited extent,” said Strobl.
Profitable history in Russia
Raiffeisen can look back on a long and profitable history in Russia and has already weathered several political and economic crises there. The increase in profits last year and this year so far is mainly due to the fact that other Western companies in Russia are flocking to Raiffeisen.
The ECB’s banking supervisor continues to put pressure on euro area financial institutions to reduce their exposure to Russia. At the same time, she recently explained that it was not easy to get approval from local authorities.
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.
