Raiffeisen generated almost half its profits this year from Russia

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Raiffeisen Bank generated almost half of its profits from its Russian operations this year despite attempts by the Austrian lender to cut back its business in the country.

Raiffeisen said on Friday that it had shrunk its lending in Russia by 30 per cent since January, in response to mounting criticism that the bank — the largest western lender still operating under Vladimir Putin’s regime — has been dragging its feet. The decline follows a 30 per cent reduction in Raiffeisen’s lending in Russia in 2022.

As well as reducing its Russian loan book — now €6.3bn in size — Raiffeisen has scaled back its payments business and terminated relationships with local banks.

“We continue to work on options leading to deconsolidation. In doing so, we depend on numerous regulatory approvals from Russian and European authorities and can therefore influence the pace only to a very limited extent,” chief executive Johann Strobl said on Friday.

Over the past nine months, Raiffeisen’s Russian business reported a post-tax profit of just over €1bn, the company disclosed in third-quarter earnings on Friday. The group — one of the largest lenders in central and eastern Europe and the Balkans — reported an overall profit of €2.1bn.

The bank is unable to repatriate any of its bumper earnings in Russia, however, because of capital controls imposed by the Kremlin.

Raiffeisen is still exploring the possibility of a strategic exit from Russia. The bank was previously negotiating with two institutions in the country, a senior executive told the Financial Times.

Those talks have stalled, however. Other more creative options — including an asset swap proposal the bank was exploring earlier this year — have also failed.

Meanwhile, the Russian government has increased its restrictions on western businesses in recent months, complicating exits from the country. Profits worth tens of billions of dollars from western companies are still marooned inside Russia.

According to the Kyiv School of Economics, between $18bn and $20bn of the profits of companies headquartered in “unfriendly” countries — which face restrictions from the Kremlin — are stuck.

Raiffeisen has a long and profitable history of working in Russia and has endured several political and economic crises there before.

In 2022, Raiffeisen reported a group profit of €3.6bn, compared with €1.4bn in 2021. Of that, €2.2bn, more than 60 per cent, was attributable to businesses in Russia and Belarus.

The surge in profits last year and so far this year has been primarily driven by other western businesses in Russia flocking to Raiffeisen.

In February, the US Treasury announced it was probing Raiffeisen over its Russian business. There is no suggestion of wrongdoing and Raiffeisen has said it is fully co-operating with the inquiry, which its executives have described as a check-up on compliance that does not have any specific target.