Business

SocGen exits Russia with sale of Rosbank stake to oligarch

Société Générale will face a loss of 3.1 billion euros after it agreed to leave Russia by selling its stake in Rosbank to an investment company founded by billionaire Vladimir Potanin.

The French bank announced on Monday that it was selling its entire stake in Rosbank, as well as its Russian insurance business to Potanin’s Interros Capital, after coming under scrutiny for its large exposure to the country following Russia’s invasion of Ukraine.

Along with Austria’s Raiffeisen Bank and Italy’s UniCredit, SocGen is one of the Western European financial institutions with the largest presence in Russia and the first of the three to find a way to sell off.

SocGen, the first bought a stake in Rosbank from Interros in 2006 before it consolidated control two years later, it announced that it would write down the net book value of the divested operations of around €2 billion and a further €1.1 billion non-cash write-down.

“The completion of this operation should occur in the coming weeks,” SocGen said, adding it aims to exit the country “in an effective and orderly manner.” SocGen shares are up more than 6 percent in early trade.

Interros’ other investments include shares in the metals company Norilsk Nickel, which Potanin had long fought to acquire. Potanin, the richest man in Russia, has been sanctioned by Canada.

SocGen said Interros will repay a subordinated debt loan it extended to Rosbank as part of the transaction. It was previously said that the loan would amount to EUR 500 million.

The group also said its core Tier 1 capital ratio – which stood at 13.7 percent at the end of December – would be impacted by 20 basis points from the sale, adding that it is still well above regulatory minimum thresholds.

“The sale of the Russian business with a manageable impact on the CET-1 quota is positive,” said RBC analyst Anke Reingen. “It should eliminate the backlog” of negative investor sentiment.

SocGen also said it will maintain its dividend payout plans for 2021 and proceed with a €915 million share buyback.

The Russian setback came just as SocGen was making headway with its latest recovery plan under longtime CEO Frédéric Oudéa, who had been trying to stabilize the bank following a 2008 rogue trading scandal.

Oudéa has since weathered several crises including Equity Derivatives Losses suffered at the height of the corona pandemic. He has made another push over the past year to try to reduce risk appetite in SocGen’s investment bank, and tried to increase profitability in order to increase the lender’s share price. SocGen posted its highest-ever annual profit in 2021, helped by an economic recovery across Europe.

Unlike its peers, SocGen had not previously announced its intention to leave Russia, even as a wave of companies from fast-food group McDonald’s to oil major BP announced they were leaving in the days after the start of the war in Ukraine although many have not done so as they would exit or warned it might take time. some like French energy company TotalEnergies have said the sell-off raises the issue of handing over funds to Russians whom the West wants to sanction.

SocGen had considered a sale from the start of the war but kept the option secret due to the sensitivity of such discussions, a person familiar with the matter said. The bank had also warned of the risks of expropriation by the Russian state.

European banks became crawl Finding ways to exit the Russian market after the February 24 invasion and subsequent imposition of severe sanctions by Western governments.

Those with investment banking businesses that didn’t have a retail presence — including Wall Street banks such as JPMorgan and SocGen’s French rival BNP Paribas – ceased operations faster and moved operations out of Russia.

SocGen’s Rosbank unit employs 12,000 people. It has previously said that its exposure to Russia was €18.6 billion, or 1.7 percent of the group’s total exposure, the bulk of which was linked to Rosbank.

Additional reporting by Stephen Morris

https://www.ft.com/content/21b64f70-e71e-47d7-bf24-ad90dfa6a854 SocGen exits Russia with sale of Rosbank stake to oligarch

Adam Bradshaw

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