Sberbank, Russia’s largest lender, is exiting practically all European markets, alleging huge financial withdrawals and threats to its workers and property as a result of Russia’s invasion of Ukraine and Western sanctions.
The action seemed inescapable after the European Central Bank (ECB) ordered the bank’s European arm to close after warning it would fail due to a run on deposits prompted by the invasion, which Moscow refers to as a “special operation.”
Sberbank, a state-controlled bank, declared record annual profits for 2021 on Wednesday.
Following an instruction from Russia’s central bank to save foreign currency, the bank stated it was no longer able to provide liquidity to European businesses. However, it stated that the company’s capital and assets were sufficient to reimburse all depositors.
The action underlines the pressure that certain Russian firms are under as a result of the West’s extraordinary efforts to isolate Moscow, which include sanctions against its central bank and the suspension of some of its banks from the global payments system SWIFT.
Elvira Nabiullina, the governor of Russia’s central bank, said on Wednesday that the country’s economy was in a critical state and that she was doing everything she could to ensure the financial system could withstand any shock.
Sberbank announced in a statement that “under the current situation, it has decided to exit the European market.” “Abnormal financial withdrawals and threats to the safety of the group’s personnel and branches have been experienced by the group’s subsidiary banks.”
Sberbank had 13 billion euros ($14.4 billion) in European assets as of December 31, 2020, with operations in Austria, Croatia, Germany, and Hungary, among others.
Following the imposition of sanctions, the bank’s European subsidiaries encountered a liquidity problem, resulting in the bank losing control of those units in the first quarter of this year.
In November, Sberbank stated it aimed to complete the sale of its operations in Bosnia and Herzegovina, Croatia, Hungary, Serbia, and Slovenia in 2021, for a total value of roughly 500 million euros.
The Slovenian business will be acquired by NLB, a Slovenian bank.
Sberbank could not provide any information on the other possible transactions.
Sberbank’s operations in Switzerland are unaffected by the pullout, according to the bank, which is continuing to operate normally.
LEAP INTO PROFIT
Sberbank’s net profit for 2021 increased by 64% to 1.25 trillion roubles ($12.38 billion) compared to the previous year. The company’s net interest income was 1.8 trillion roubles, with a return on equity of 24.2 percent for the year.
The results were “excellent,” according to CEO German Gref, who has remained quiet since the crisis began, but he said the focus was now on “the new challenges that the Russian economy and banking industry are experiencing.”
The bank’s investor call to discuss the results was canceled.
The Moscow Exchange has paused stock trading in order to prevent capital outflows from Russian assets, but Sberbank’s depositary receipts in London dropped more than 90% to 1.7 cents on Wednesday.
