why and how investors do not leave Russia

The mass exodus of “unfriendly” investors from the Russian Federation, it would seem, became commonplace back in 2022. But 2023 has shown in a number of ways that things are, in fact, a little different than they seem. One striking example is foreign banks. Only a few of them changed owners. There were few players ready to run, despite the losses. Most preferred to wait, freezing or gradually reducing their business. And so far there is no evidence of a change in trend.

In November 2023, a very modest in size (152nd place in terms of assets) G&T bank, a subsidiary of the Czech J&T Banka, changed owners. It was bought by a certain Russian company “Bureaukrat”. This example clearly shows what kind of transactions are currently being implemented by foreign investors in the banking market of the Russian Federation. Of the 45 credit institutions, the list of which with a special exit procedure was approved by the authorities last October, only five, not the largest banks, took this path (Rosbank, Tinkoff Bank and HKF Bank managed to sell earlier).

As one of Kommersant’s interlocutors in the market explains, on average a transaction took four to six months, and now the process has only lengthened.

For example, at the end of September permission was received for the sale of Intesa, but the deal has not yet been closed. The Russian authorities did not hide the fact that they made every effort to ensure that it would not be easy for bank owners. “The stated position is that it will be very difficult for us to release foreign banks until there is a decision to unfreeze the assets of Russian banks,” explained Deputy Finance Minister Alexei Moiseev.

But the point, of course, is not only the complexity of the procedure. In the end, businesses and larger ones were simply abandoned by foreign owners after the outbreak of hostilities in Ukraine or given away for next to nothing.

The question is that foreign investors have a choice and it is looking less and less obvious.

You can sell assets on the proposed terms and incur losses. For example, RN-Bank was sold for 7 billion rubles. with capital according to RAS of 30.1 billion rubles. at the beginning of 2022. Or gradually shrink the balance sheet, bringing the bank to the point of liquidation and surrender of its license. For example, Citibank chose the route of selling its loan portfolio.

And you don’t have to fuss. “Some foreign banks are deliberately waiting in the hope that the situation will change and they will be able to resume business in Russia,” emphasizes Kommersant’s interlocutor on the market. “To be honest, I don’t see a large number of people wanting to actually sell their business right now,” says another Kommersant source.

Moreover, Russian investors are also cautious: potentially all transactions with partners that suddenly became “unfriendly” were associated with sanctions risks both in relation to the new owners and the credit institutions themselves: Rosbank, Tinkoff Bank and HKF Bank were on the US SDN list . And the European Union, as part of the 12th package of sanctions in December, directly announcedthat those who buy abandoned or seized assets will face sanctions.

As a result, the survival strategy of foreign investors in Russia has begun to change from “hit and run” to “play dead.”

So in 2024, market participants are not expecting an increase in the number of transactions, at least with banking assets, because they do not see any sense in them, including economic ones.

Theoretically, Raiffeisenbank, the largest credit institution of foreign origin in the Russian Federation, could become a special case. Due to his size, it is difficult for him to pretend to be dead. Therefore, the management of the parent Raiffeisen Bank International (RBI) from the spring of 2022 until recently has been talking about the strategy of excluding the Russian bank from the group by selling or spinning off the business. RBI CEO Johann Strobl argued in early November that “there is good progress on both options.” However, the market is skeptical about these statements.

Firstly, it is the largest bank with foreign participation, and is also one of the systemically important credit institutions (SICs). Secondly, cross-border payments to Europe are made through it. In addition, it could be useful in transactions similar to the RBI buyout of shares in the construction company Strabag from the Russian MCAO Rasperia Trading Limited, which was announced in December.

If the deal is completed, the Russian side will receive €1.51 billion, whereas previously it could have lost its foreign assets.

“Those who really wanted to sell the business have already left. Those who remain are subject to pressure from the West, but rather show more rhetoric than real attempts to sell their businesses,” notes Denis Taradov, partner of the Unicon audit and consulting group. Moreover, the expert emphasizes that access to making payments on foreign markets allows you to generate good income. According to Mr. Taradov, the reluctance of Western structures to agree to significant discounts “is quite adequate and indicates that for them business is more important than politics.”

Olga Sherunkova