2023-05-23 08:05:00
A “spin-off” of the Russian subsidiary from the rest of the business is the more likely of the two exit options than a sale, three people familiar with the situation told Archyde.com. Attempts to find a buyer have been unsuccessful for months. Vienna. A bank spokeswoman said at the request of the APA that both options, a sale or a spin-off, would continue to be examined, as communicated in March.
According to one of the insiders, according to Archyde.com, a split aims to distance itself from Russia following the Russian invasion of Ukraine and avoid further reputational damage. Austria’s second largest bank is under great pressure from investors, banking regulators and US sanctions watchdogs because of its Russian business, which makes billions in profits and is the largest source of income.
The banking group, which is considered the house bank of the conservative governing party ÖVP, received backing from Foreign Minister Alexander Schallenberg (ÖVP) at the beginning of the week. At a meeting with his counterparts in Brussels, he told those gathered to discuss new Russia sanctions that Raiffeisen should not be singled out on the issue. The bank is no different from most Western companies that continue to operate there, the minister said, according to an Austrian official. Schallenberg made similar statements earlier. The major Italian bank UniCredit, for example, is still active in Russia.
One thing is certain: A spin-off – like a sale – is not an easy undertaking. “It’s not a walk in the park, there are many hurdles to overcome,” said bank boss Johann Strobl a few weeks ago. In addition to numerous necessary permits, the RBI might also put a spanner in the works. In any case, the company will not give up its presence in Russia lightly, summarized the chairman of the supervisory board, Erwin Hameseder.
RBI has been operating in Russia for 30 years and is now the main Western institute in the country. After numerous Russian banks were excluded from the international financial system SWIFT as a result of sanctions following the outbreak of the Ukraine war, the Russian subsidiary played an important role in international payment transactions for the country. However, no dividends are currently flowing from Moscow to Vienna.
The bank is also under observation: in January, the US sanctions authority OFAC launched an investigation into Raiffeisen. The authority wants to know how the sanctions are being implemented and asks for a few questions to be answered. The European Central Bank (ECB), in turn, is urging the bank to arm itself once morest the risks. In addition, there was criticism from Ukraine, which accuses the RBI of financing the war. All of this puts pressure on the share price. Since the beginning of the year, the RBI papers have lost around six percent in value.
“The spin-off has the advantage of responding to the desire of the capital market and the sanctioning institutions to withdraw from the market without having to find a buyer,” said an insider. But this requires the approval of the ECB and the Russian authorities. There is also the threat of an exit tax, which might make the undertaking expensive. A second person familiar with the situation says that following a spin-off, the regional Raiffeisen banks might sell their shares in the company. “Whatever some want to do, some don’t.”
A direct sale, on the other hand, would require the approval of President Vladimir Putin and would be associated with high requirements and losses in the selling price. A third insider said the split is more likely because any potential buyer has been deterred by Western sanctions. One investment banker conceded that a spin-off would also be the simplest solution and would buy the bank time.
After Russia invaded Ukraine in February 2022, RBI said it was reviewing all options for its Russian subsidiary. It was not until the end of March at the annual general meeting that bank boss Strobl changed the line of communication: they are now concentrating on a sale or a spin-off, he said. At the same time, business in Russia will be further reduced. A specific timetable was not given. In the event of a spin-off, results cannot be expected before the end of the third quarter, he explained in a conference call with analysts. A sale, in turn, would take at least a quarter.
In any case, shareholders have doubts regarding the implementation. “Both options (sale and spin-off, note) are hardly realistic,” said Florian Beckermann from the Investors’ Association (IVA). RBI will probably remain in Russia and further reduce business in consultation with the ECB, he said. The ECB declined to comment.
The bank’s plans for a “spin-off” provide for the Russian subsidiary to be brought into its own company and listed in Vienna or on another European stock exchange. Each RBI shareholder – almost 60 percent of the capital is owned by the regional Raiffeisen banks – would then own a corresponding share in the new entity. The move would have to be approved at an extraordinary general meeting. A capital market expert from Vienna said: “It will be a gamble, a bet on the outcome of the war.”
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