Mutilated by sanctions, Russia’s leading bank is leaving Europe

  • Sberbank is withdrawing from the European market following an order from the ECB
  • He says he faces cash flows, threats to staff and property
  • He says he has enough resources to pay all depositors
  • Net profit for 2021 increased by 64% to a record 1.25 trillion rubles

MOSCOW, March 2 – Russia’s largest lender, Sberbank (SBER.MM), is leaving almost all European markets, blaming large cash flows and threats to its staff and assets following Russia’s invasion of Ukraine and Western sanctions.

The move seemed inevitable after the European Central Bank (ECB) ordered the closure of the bank’s European division, warning that it was facing failure due to the accumulation of deposits caused by the invasion, which Moscow calls a “special operation”. Read more

The news came on Wednesday, when state-controlled Sberbank reported record annual profits for 2021.

The bank said it was no longer able to supply liquidity to European subsidiaries following an order from Russia’s central bank, which is seeking to keep foreign currency. But he said the capital and assets were enough to pay off all depositors.

The move underscores the pressure some Russian businesses are facing from the West’s unprecedented steps to isolate Moscow, including sanctions against its central bank and the exclusion of some of its banks from the global SWIFT payment system.

Russia’s central bank governor Elvira Nabiulina said on Wednesday that the country’s economy is facing an extreme situation and she is doing everything possible to ensure that the financial system can cope with any shock. Read more

“In the current situation, Sberbank has decided to leave the European market,” the statement said. “The group’s subsidiaries face unusual cash flows and threats to the safety of its employees and branches.”

Sberbank had European assets worth 13 billion euros ($ 14.4 billion) as of December 31, 2020 and operations in countries including Austria, Croatia, Germany and Hungary, among others.

It says European subsidiaries have experienced a liquidity crisis following the imposition of sanctions, which led to a loss of control over these units in the first quarter of the year.

In November, Sberbank said it planned to finalize the sale of operations in Bosnia and Herzegovina, Croatia, Hungary, Serbia and Slovenia in 2021 in a deal worth about 500m euros.

Slovenian bank NLB (NLBR.LJ) has said it is acquiring Slovenian business.

Sberbank did not provide up-to-date information on other potential transactions.

The exit does not affect Sberbank’s business in Switzerland, which it says continues to operate as usual.

PROFIT JUMP

Sberbank’s net profit for 2021 jumped 64% year-on-year to 1.25 trillion rubles ($ 12.38 billion). The return on equity for the year is 24.2%, and net interest income amounts to 1.8 trillion rubles.

CEO Herman Gref, who has been silent since the crisis unfolded, described the results as “exceptional”, but said the focus was now on “the new challenges facing the Russian economy and financial sector”.

The bank canceled its call to the investor to discuss the results.

The Moscow Stock Exchange stopped trading in shares and tried to prevent the outflow of capital from Russian assets, but Sberbank’s depository receipts in London fell by more than 90% on Wednesday to 1.7 cents.

($ 1 = 100.9700 rubles)

(1 dollar = 0.9018 euros)

Reuters Report Edited by Clarence Fernandez and Mark Potter

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