Unicredit Bank cleaned up the portfolio

Unicredit Bank became the first bank with foreign capital remaining in the Russian Federation, whose financial results became known from the general statements of the parent group. Judging by the information of the Italian Unicredit, since the second half of the year, the Russian bank began to significantly reduce business volumes. Another major European player on the Russian market, the Raiffeisen group, has a different strategy, experts say: Raiffeisenbank is more likely to use the situation to strengthen its position. In general, the foreign players who stayed in the Russian Federation take a wait-and-see attitude.

The Italian Unicredit in 2022 significantly changed the focus and size of business in the Russian Federation, follows from the financial statements of the group disclosed on January 31 for the last year. In particular, at the end of the year, the portfolio of loans and deposits of Unicredit Bank decreased by 44.3% and 17.2%, respectively (to €6.6 billion and €8.7 billion).

The most active reduction was observed precisely in the third and fourth quarters, and, according to experts, these fluctuations cannot be attributed to currency revaluation. In 2022, the ruble against the euro rose by 10%, follows from the data of the Central Bank. In the last quarter of 2022, Unicredit Bank also sharply reduced its profit (by 21.5 times compared to the previous quarter, to €16 million). As a result, the total loss for the four quarters amounted to €220 million. At the same time, net interest and commission income increased by 67% and 18% (to €757 million and €82 million).

The main line, which showed a rapid increase in income (by 17.2 times, up to €482 million), is trading operations. In this case, we can talk about hedging instruments, derivatives and other foreign exchange transactions. Income from them is abnormally high, in contrast to the values, for example, in 2021, when the bank showed a result of €3–11 million per quarter.

As independent expert Aleksey Nechaev suggests, in this case, the income was brought by actions with the currency. So, he explains, clients could make conversion transactions in the bank (buy or sell currency) and then make payments, including abroad (the bank works with SWIFT, unlike sanctioned players).

Unicredit announced a possible winding down of business in Russia. Judging by the balance sheet disclosed by the parent bank, in the Russian Federation the business of the subsidiary is “already being paid off,” independent expert Olga Ulyanova believes: clients are withdrawing funds from their accounts, but no new ones are attracted.

A similar process is most likely going on in the loan portfolio, the expert believes. One of the possible options is to send the liquidity received from repayment of loans to a deposit account with the Central Bank, which allows you to receive a small income, Alexey Nechaev specifies (6.5-7.5% per annum).

At the same time, the second European group, even larger in terms of presence in the Russian Federation, Raiffeisen, is pursuing a different policy. “With the current restrictions on the sale of foreign banks, Raiffeisenbank has received a formal and quite confident “cover” in order to quietly continue its activities in Russia and receive income from it, while Unicredit Bank did not have a comparable commercial acumen before,” believes Ms. Ulyanova. — Historically, Raiffeisenbank has been a profit driver for the Austrian group (15% of the group’s assets, which brought 30% of its income), while Unicredit Bank has never been a key profit center for the parent group.

Foreign banks operating in Russia show “differences in priorities,” Ivan Uklein, director of banking ratings at Expert RA, agrees: “Some hastily left the country with a maximum discount, while most players, taking into account investments made earlier, seek to minimize losses from curtailing or sale of the business. Most of the financial groups from the so-called unfriendly jurisdictions, the expert explains, have taken a wait-and-see attitude – they are not increasing their presence in Russia, they are not in a hurry to leave with a loss, but they are not refusing to negotiate the sale either.

Olga Sherunkova