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Tuesday, March 28, 2023

Raiffeisen: Zero euros for the sale of the Russian subsidiary?

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Johann Strobl, Chairman of the Management Board of the RBI Group APA/H. newbuilder

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Is Raiffeisenbank International, in which the regional Raiffeisen banks hold the majority, selling its Russian subsidiary or not? And if so, at what price? These questions have been asked since Russia invaded Ukraine almost a year ago. RBI CEO Johann Strobl described the situation when presenting the preliminary business figures for 2022 on Wednesday.

“We are examining all strategic options for the future of Raiffeisenbank in Russia, including a carefully executed exit,” said Strobl. “We have been working flat out for months.” The withdrawal of a bank from a country is complex and lengthy if the whole thing takes place within the EU, as the sale of the RBI unit in Bulgaria recently showed. “In Russia we have a situation with constantly changing framework conditions, the way to a solution is even more demanding,” said Strobl.

Interested parties for the Russian subsidiary

Although there is interest in the Russian subsidiary (not from the West), any decision to sell also depends on the goodwill of the Kremlin in Moscow. Accordingly, the scenario that the Russian subsidiary has to be sold for zero euros is also a realistic one. “But even then we still have a core capital ratio of 14 percent, which is well above the regulatory requirements,” said Strobl.

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The Russian subsidiary is a cash cow – despite or perhaps because of the war and the sanctions policy. According to preliminary figures, it brought in a net profit of around two billion euros (plus 334.4 percent) in the previous year. There are mutliple reasons for this. First, the strength of the Russian currency ruble in the previous year. The ruble has mainly benefited from high energy prices and government foreign exchange restrictions. Second, companies in Russia have to convert export earnings into rubles in a short time and pay very high surcharges if they then convert back into another currency. Thirdly, because of Western sanctions, RBI is one of the few banks through which Russians can still transfer money abroad – at high fees. The loan portfolio in Russia, on the other hand, was reduced by around 30 percent.

Overall, RBI made a net profit of around 3.6 billion euros in the previous year. In 2021 it was 1.4 billion. Without Russia, Belarus and the proceeds from the sale of the Bulgarian business, the consolidated result was still 982 million euros. This also meant an increase of 35 percent compared to the previous year. “The profitability of the business in Austria and in the regions of Central Europe and Southeastern Europe remains robust,” said Strobl. Rising interest rates have also contributed to rising profits. The core capital ratio is 16 percent.

Restrictions from Russia

Profits from Russia cannot be transferred to the group headquarters in Vienna or used within the group because Russia has imposed restrictions on this as well. It is speculated that the RBI is playing for time with its Russian subsidiary in order to be able to do business normally again and access profits after the end of the war or Vladimir Putin as president. Strobl didn’t want to comment on that. It is speculation as to which regime there will be in Russia and how it will continue. It is also difficult to say whether the current conditions for investors from “unfriendly states” will last longer or only in the short term.

When asked about the moral issue, Strobl said the deals being made were “within the sanctions.” “That’s okay.” They were “shocked and deeply affected” by Russia’s attack on Ukraine. You help a lot in Ukraine and the Ukrainian colleagues.

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: Nachrichten

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