Raiffeisen Bank to Exit Russia by Summer 2024 Amid EU Pressure

Raiffeisen Bank International (RBI), Austria's second-largest bank, plans to begin its withdrawal from Russia in the third quarter of 2024, with the goal of completing the exit by summer 2024. The decision comes under pressure from the European Central Bank (ECB) and the European Union to significantly reduce its business operations in Russia.

Why this matters: The exit of Raiffeisen Bank International from Russia has significant implications for the Russian economy and the global financial system, as it may disrupt international payments and trade. This move also highlights the challenges faced by Western businesses operating in Russia amid ongoing sanctions, and may set a precedent for other companies to follow.

According to RBI's CEO, Johann Strobl, the bank will start implementing the ECB's directive to downsize its Russian operations in Q3 2024. "The expectation is that implementation will begin in the third quarter. We'll now draw up the plan and analyze what we can do and what the impact will be," Strobl stated.

The ECB's proposals require RBI to slash loans to Russian customers by 65% by 2026 and significantly decrease international payments originating from Russia. RBI has already reduced its customer loans in Russia by 58% since its peak in 2022 to €5.8 billion ($6.2 billion). The bank recorded net income of €644 million ($691 million) in the first three months of 2024, with about half of that profit coming from operations in Russia and Belarus.

RBI considers selling its Russian business as the"fastest and most transparent"way to exit the market, having received expressions of interest from various Russian and foreign partners over the past two years. However, finding suitable buyers remains a challenge due to existing sanctions. "The most attractive option for Raiffeisen to fully end its operations in Russia would be to sell its subsidiary there to another foreign company,"Strobl noted, adding that"other possible Russian buyers are already sanctioned."

RBI has been resisting demands from the US and EU to speed up its Russia exit, with Austrian officials expressing hope of reviving relations with Moscow after the conflict in Ukraine ends. The bank plays an important role in the Russian economy, enabling euro and dollar payments to and from the country. It is one of the few foreign banks to have stayed in Russia despite sanctions imposed by Western countries since the start of the Ukraine conflict in 2022.

Raiffeisen Bank International's decisionto exit the Russian market by summer 2024 marks a significant shift in its strategy, driven by increasing pressure from European regulators. As the bank navigates the complexities of withdrawing from Russia amid ongoing sanctions, its experience highlights the challenges faced by Western businesses operating in the country. The planned exit will likely have implications for both RBI's financial performance and the Russian banking sector as a whole.

Key Takeaways

• Raiffeisen Bank International to exit Russia by summer 2024.
• Exit driven by European Central Bank and EU pressure to reduce Russian operations.
• Bank to slash Russian customer loans by 65% by 2026 and decrease international payments.
• RBI considers selling Russian business, but finding suitable buyers is a challenge.
• Exit may disrupt international payments and trade, impacting Russian economy.