Raiffeisen Bank still makes most of its money in Russia
It appears that the Austrian Raiffeisen Bank is reluctantly preparing its withdrawal from Russia. If the departure were to be carried out, it could prove costly: The institution greatly benefits from Putin's war economy.
The Austrian Raiffeisen Bank International (RBI) has increased its profit in the first half of the year. Net income rose by 14 percent to 661 million euros, as the bank announced in the morning. Once again, the Russian subsidiary contributed more than half of the group's profit. The RBI thus exceeds expectations. Analysts had expected a group profit of 523 million euros on average.
The bank does not provide any new information about the planned withdrawal from Russia. According to the report, the RBI is continuing to work on a spin-off or sale of its Russian subsidiary. "We are satisfied with the development of the group's result," says RBI CEO Johann Strobl. "In line with the guidelines of the ECB, we are accelerating the reduction of our business volume in Russia. Parallel to this, we are continuing to work on a sale of Raiffeisenbank Russia."
The bank does not provide a timetable for its departure. In accordance with the guidelines of the European Central Bank (ECB), the RBI wants to further reduce its business in Russia. First consequences for customers, such as restrictions in payment traffic, are already visible and further steps are to follow.
Clear Threat from the USA
The Russian subsidiary of the RBI is, alongside the Italian UniCredit, the largest Western bank in Russia. Since the outbreak of the war in Ukraine, the institution has been exploring options for an exit, but is making slow progress. A reason for this may be that the Vienna headquarters is still looking for a way to avoid losing its Russian billion-dollar profits.
In early May, the institute suffered a severe setback in its efforts. After a warning from the U.S. Treasury Department, the bank had to abandon plans to repatriate its profits from Russia through a complex transaction. It is suspected that the sanctioned oligarch Oleg Deripaska would have benefited from the deal. Western sanctions prohibit the direct and indirect support of the Russian defense industry in the Ukraine war.
The RBI describes its plan in its half-yearly report as "legally correct" and "compliant with sanctions". However, after intensive discussions with the relevant authorities, the board decided on May 8 not to take on these political risks "in the interest of customers and shareholders", the bank writes.
U.S. Treasury Secretary Janet Yellen recently advised the RBI and other banks operating in Russia to abandon their business in the country. "We are considering a possible tightening of our sanctions against banks that do business in Russia," Yellen threatened in May. "If there is a reason for it, we will impose secondary sanctions on foreign banks operating in Russia."
Financial Market Authority Criticizes Money Laundering
It seems that the RBI is not making progress, but rather regressing in its withdrawal. According to an insider, the U.S. sanctions authority Office of Foreign Assets Control (OFAC) also expressed concern in May about the possible expansion of the RBI in Russia. The expansion is at odds with the bank's pledge to reduce its Russian activities, the person who had insight into the letter said.
Anger was also caused for RBI in June by the Austrian financial market authority. The FMA has imposed a fine of around two million euros on the bank for violations of anti-money laundering regulations. This is due to breaches of duty of care to prevent money laundering and terrorism financing at two correspondent banks, the authority stated. A person with knowledge of the matter named the countries Cuba and Bahrain.
The RBI stated that the allegations in question were unfounded and that it had implemented appropriate anti-money laundering systems, procedures, and controls for its correspondent bank relationships. The RBI will therefore appeal the fine.
The Austrian Raiffeisen Bank International's Russian subsidiary, despite being one of the largest Western banks in Russia, has been exploring options for withdrawal due to sanctions and geopolitical tensions. Despite the potential costs, the bank is reportedly continuing its efforts to reduce its business in Russia, as advised by the European Central Bank.
The Austrian Financial Market Authority has imposed a fine of around two million euros on the RBI for violations of anti-money laundering regulations, particularly in relation to correspondent banks in Cuba and Bahrain. The bank disputes these allegations and plans to appeal the fine.
