Citi is winding down – Kommersant Newspaper No. 156 (7357) of 08/26/2022
[ad_1]
The global financial corporation Citi is curtailing services in Russia not only for citizens, but also for small and medium-sized businesses (SMEs). However, the bank still has hundreds of clients from among global international corporations in the country. The sale of assets by foreign companies in the Russian Federation is now seriously hampered. But Citibank allows the sale of the loan portfolio, which is quite possible even taking into account restrictions on non-resident transactions, lawyers believe.
After considering “all available options,” Citi announced a decision to wind down its retail and SME business in Russia, according to the corporation’s statement. The process may take several years, as “existing regulatory requirements and obligations to customers must be met.”
Expenses for winding down will amount to about $170 million (10.2 billion rubles), mainly over the next year and a half. The main part is the costs of restructuring, closing contracts with suppliers, etc. The curtailment of business will affect 2.3 thousand employees, while as of the end of the third quarter of 2021, 3.4 thousand people worked in Citibank. It is also planned to close 15 branches. In total, the bank has 23 additional offices and seven more branches in the Russian Federation, according to data on the Central Bank website.
Back in 2021, Citi warned that it had decided to focus its retail business in Asia and EMEA (Europe, the Middle East and Africa), phasing it out in Russia. The group has now expanded its cuts to include the SME segment in the withdrawal process.
The bank retains about 600 more clients of the department for work with global international corporations, follows from the last published annual report. The media, with links to sources, reported plans for the complete exit of Citi and the sale of the entire bank.
Recently, the Russian authorities introduced restrictions on transactions with non-residents (see Kommersant dated July 15). However, it cannot be said that there is a ban on the sale of a separate loan portfolio between a Russian legal entity, even if it is controlled by foreign shareholders or the state, and another Russian legal entity, Mikhail Alexandrov, partner at A2 law firm, notes. In the situation of selling not a bank, but a separate portfolio, the lawyer explains, the chances of a successful transaction increase, since, unlike transactions for the sale of shares or shares, such transactions will not require approval from the government commission for foreign investment control.
Another question is what to do with the money received from the sale of the portfolio and whether the sellers will be able to withdraw them outside the Russian Federation, Mr. Aleksandrov says: formally this is possible, but “now it is problematic.” The portfolio sale transaction can be structured as an asset exchange, the lawyer clarifies, or, for example, despite the fact that the final person to whom the rights of claim on loans will be transferred will be a Russian legal entity, payments for the asset can be made abroad.
According to Olga Ulyanova, an independent banking expert, the next steps to wind down Citi’s business in the Russian Federation will indeed involve not the sale of the entire subsidiary bank with a license, but the sale of individual product portfolios.
Thus, restrictions on the exit of foreigners from business, most likely, will not be directly applicable, she notes. “Another thing is that many of the banks that were previously called potential buyers of portfolios from Citi are now under sanctions,” the expert clarifies. “Most likely, a deal with sanctioned Russian banks will be impossible for Citi, which means that the number of potential buyers will decrease.” . As a result, Ms. Ulyanova notes, the market will require an additional discount to the value of portfolios.
Elvira Nabiullina, Governor of the Bank of Russia, July 22:
If the Russian “subsidiaries” of foreign banks, and according to our legislation, these are Russian banks, comply with all established standards, work normally with clients, carry out settlements, there is no need to introduce any external management.
As for the release of more than 2,000 Citi employees, some of them, presumably, will be able to transfer to acquiring banks in order to continue servicing the transferred portfolios, Olga Ulyanova believes. The other part, according to her, “may be temporarily out of work, but given the fact that in recent months the banking market has lost some of its employees due to the latter moving abroad, a certain niche still remains free.”
[ad_2]
Source link