It is no secret that European banks have performed well in Russia, but with the onset of war and the blockade of the Russian financial system, they began to withdraw from that market. Almost all except the Austrian Raiffeisen Bank International (RBI).
However, the pressure for that bank to withdraw is growing stronger – the European Central Bank (ECB) is demanding a gradual shutdown of operations in Russia, not an immediate exit, but a concrete plan for withdrawal and gradual cessation of operations. The ECB’s request is merely an addition to American pressure, as they are ‘concerned about Raiffeisen’s operations in Russia’.
The plan, it is speculated, could involve the sale or closure of the bank. Possibly not only in Russia. Namely, there are whispers that RBI could sell its subsidiaries, starting with those in Croatia and Bosnia and Herzegovina. Although the official response from RBI headquarters is ‘we do not plan to leave the mentioned markets’ – literally just that sentence – the rumors do not stop.
Not at all illogical, as it is enough to look at the bank’s stock price for things to become clearer. Before the war, the price hovered around 28.3 euros, during the war it slipped to just 11, and currently it is around 13 euros per share. The pressure from America and the ECB is directly lowering their price, and when stock prices fall, it means that the company is starting to lack capital.
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Stock Price Movement
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Insiders warn on one hand of the fact that RBI, with the right economic logic, does not want to leave Russia, as they remain one of the few Western banks there, consequently one of the most important Western lenders, which significantly boosts profit. On the other hand, the lack of capital due to falling stock values can only be compensated in two ways.
– For all operations in the markets, the bank must have enough capital. When it is lacking, there are only two options: either you dispose of assets or raise capital. The first option involves selling everything that can be sold and has a buyer, while there is not much offer for the second option. However, the problem is that exiting Russia actually implies writing off capital – that is exactly what Societe Generale did when they were among the first to leave that market.
Although we do not know how much capital that would be, it is clear that a large amount is at stake if RBI does not want to leave Russia and it is evident that they can hardly afford that at this moment. The bank is likely speculating about the sale to gauge market sentiment and potential buyers, to see if that ‘gap’ can be closed by selling the Croatian or BiH subsidiary. Although there is currently no confirmation of a sale, it is logical that the bank is seeking solutions in that regard. In any case, it is about significant disruptions that have shaken even the large Deutsche Bank, so upheavals are expected – analyzes one insider of the bank’s internal (dis)conditions.
Long-term Default Prospects
When it comes to selling the bank from the regional market, OTP Bank is reportedly interested in the one in BiH, but there is no interest for the Croatian subsidiary. An analyst who wished to remain anonymous says that there have been situations before when Croatian ‘arms’ tried to be sold – even the Italian Unicredit Bank intended to do so – but there were no buyers.
– Banks always have markets that are less attractive according to some of their parameters, and that is our market. On the other hand, it is possible that for some internal reasons rumors are being spread and reactions are being tested, without the intention of actually selling the bank, which has often happened here. However, what makes the whole story more interesting is the fact that RBI has a completely different risk portfolio than the comparable Erste Bank, therefore the long-term prospects for default are greater.
It is clear that banks operating under greater stress are more actively considering exit options. After all, RBI has always expanded into as many markets as possible, regardless of who the local players are. Before the financial crisis, they had offices all over the world, even in Singapore. Erste, on the other hand, strives to be among the top three banks in the market and chooses clients much more carefully. And there is also something about the story that potential investigations for money laundering at the European level are being prepared – explains the interlocutor.
Just over two years after the then CEO of RBA Michael Müller resigned to prevent further reputational damage (the negative public perception surged around the call for proposals for selecting a PR agency), it is indeed not impossible for RBA to leave a market that is not very favorable to banks, nor is it very profitable anymore.
