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16 Jan 2023

Owen Walker, Financial Times

Russia: Western banks struggle to exit after adoption of law prohibiting divestment without President's approval; incl. cos. comments

Western banks struggle to exit Russia after Putin intervention, 16 January 2023

Advisers to western banks trying to exit Russia say a law introduced by Vladimir Putin is disrupting sales and allowing deals to be hijacked by businesspeople close to the Kremlin.

Almost a year into the invasion of Ukraine, only a handful of western banks have managed to leave Russia, albeit at steep cost, while others have made the choice to hold on to their businesses in the country.

For the majority trying to sell their Russian assets, however, hopes for a swift exit were shattered when Putin last year said foreign owners from “unfriendly” countries could not complete deals without his approval. The list of affected companies includes 45 banks with subsidiaries in Russia.

Advisers working on deals expect the Russian president’s intervention to thwart some sales already under discussion, while fundamentally altering the terms of others...

In late July, HSBC agreed to sell its Russian subsidiary to local lender Expobank in a deal that would allow it to exit a country that had become politically toxic since Moscow’s invasion of Ukraine at the start of the year. But that sale has now been held up. HSBC said it was still working on trying to complete the transaction, but a person with knowledge of its plans said it was up to Expobank as the acquirer to secure approval from Putin...

One bank that managed to shift its Russian subsidiary before the presidential decree was France’s Société Générale, which agreed in April to sell its Rosbank business as well as its Russian insurance operations to an investment company founded by billionaire Vladimir Potanin.

Along with Raiffeisen and Italy’s UniCredit, SocGen had one of the largest exposures to Russia of any western bank...SocGen was able to cut a swift deal because it sold to Potanin, one of Russia’s richest men with close links to the Kremlin...

Other banks looking for a quick exit did not have a ready buyer waiting in the wings, nor were they prepared to absorb such a financial hit as SocGen took...

Part of the following timelines

Ukraine: Global outrage over Russian invasion leads to sanctions, demands for businesses to divest

Ukraine invasion: Banks & financial institutions seek to cut ties with Russia