Citigroup to wind down Russian consumer and commercial operations

Citigroup has decided to wind down its consumer and local commercial banking operations in Russia after failing to find a buyer for the businesses, with most potential suitors under sanctions after Vladimir Putin’s invasion of Ukraine.

The US bank announced the exit in a statement on Thursday after spending more than a year trying to sell the divisions as western reprisals against Russia made it all but impossible to continue operating in the country. The lender added that it “continues to actively pursue sales of certain Russian consumer banking portfolios”.

Citi said its exposure to Russia had declined to $8.4bn from $9.8bn at the end of last year. About $1bn is related to the retail and local commercial banking operations being wound down.

The exit will affect 2,300 staff and 15 local branches. The lender estimates that it will cost $170mn over the next 18 months because of a mix of restructuring and vendor and contract termination fees. However, it will take two years or more to fully wind down its stock of deposits, mortgages, credit cards and small-business loans.

The bank is not closing its investment banking and transaction services operation in the country, but is reducing its exposure and not taking on new customers.

“We continue to serve institutional clients in Russia, primarily multinationals, many of whom are undertaking the complex task of unwinding their own operations in the country,” it said.

Citi first announced its intention to exit Russian retail in April 2021 as part of chief executive Jane Fraser’s global retreat from consumer banking, spanning 14 countries across Asia, Europe, the Middle East and Africa. It is also trying to find a buyer for its lender in Mexico.

Citi had been in negotiations with privately owned Russian companies including Expobank and insurance company Reso-Garantia over the fate of its consumer and commercial businesses, the Financial Times reported early last month.

Rosbank, a top-10 lender and Société Générale’s former Russian subsidiary, had also expressed interest in buying Citi’s local operations, but the prospect of any deal dimmed when the UK imposed sanctions on its new owner, oligarch Vladimir Potanin, later in July.

“We have explored multiple strategic options to sell these businesses over the past several months. It’s clear that the wind-down path makes the most sense given the many complicating factors,” said Titi Cole, head of legacy franchises at Citi.

All major banks with a significant presence remaining in Russia are attempting to sell their operations, but are facing an increasingly limited pool of buyers and huge potential losses to write off their investments.

Earlier this month, Russian president Vladimir Putin banned foreign entities from “unfriendly” countries that have sanctioned Moscow over the war from selling their stakes in Russian banks until the end of this year, further complicating sales.

The decree said Putin reserved the right to let some companies sell their shares under a personal decree, or to extend the period of the ban on sales.

French lender SocGen took a €3.1bn hit on selling Rosbank to Potanin. However, HSBC, Austria’s Raiffeisen and Italian banks UniCredit and Intesa Sanpaolo are still holding out for better deals, according to people familiar with their plans.

A senior executive at UniCredit told the FT that SocGen’s disposal was essentially a “donation” or “gift” to Potanin and that the Italian bank was seeking fair value for its assets in the country.

Additional reporting by Max Seddon