Raiffeisen Bank International (RBI) announced that it would not pursue the proposed acquisition of Strabag shares, according to a press release by the bank.

RBI had hoped to exchange €1.6bn of the bank’s trapped profits in Russia for a 28% stake in Austrian construction company Strabag that is reportedly owned by sanctioned Russian oligarch Oleg Deripaska.

However, after US authorities questioned the transaction, raising the threat of sanctions, the Austrian central bank warned RBI against the deal.

“In recent exchanges with the relevant authorities, Raiffeisen Bank International AG (RBI) has been unable to obtain the required comfort in order to proceed with the proposed transaction [of Strabag shares]. In an abundance of caution, the bank has decided to walk away from the deal,” the bank said in a press release.

Independently from the decision to cancel the Strabag transaction, RBI will continue to work towards the deconsolidation of its Russian subsidiary, the bank said, without providing more details or a specific timeline of Russian divestment.

The decision was expected, as RBI's chief executive Johann Strobl told a Q1 earnings call last week that “we will not proceed with the acquisition of the Strabag shares by Raiffeisen Bank Russia if we believe there is a risk of sanctions”.

In those results, RBI reported a consolidated profit of €664 million in Q1 but only €333mn excluding contributions from Russia and Belarus. The bank made provisions for Swiss franc loans in Poland totalling €109mn.

RBU increased its net profit in Russia by 8.2% year on year to €326mn in 1Q24. The bank’s profit grew despite a 21.9% decline in assets in Russia, to €21.1bn, and a 28.2% decline in the loan portfolio to €5.8bn. Net fees and commissions in Russia also fell € 287mn.

RBI’s return on equity (ROE) in Russia in 1Q24 was 29.1%, which is higher than that of Russia’s two largest state-controlled banks Sberbank and VTB (24.2% and 22.1% respectively).