Raiffeisen Bank International's (RBI) net profit in Russia in 1H24 rose 2.8% year on year to €705mn, with the Russian business accounting for half of Raiffeisen group’s profit, the bank said on June 30.

RBI is under heavy regulatory pressure to come up with an exit plan from Russia, but the bank would take a massive hit, as Russia made up 38% of its net profits in 2023 and this figure has if anything risen over recent quarters. RBI has been unable to access the profits it has made there because of Russian central bank restrictions.

Critics accuse RBI of delaying plans to leave Russia, hoping that Russia's full-scale military invasion of Ukraine will end before the bank will have to cave in to sanctions pressure and scrap its presence in the country. 

Earlier this year the ECB stepped up pressure on RBI and Italy's UniCredit to exit Russia, with UniCredit reportedly questioning the ECB's demands to quit.

In its 1H24 report, CEO Johann Strobl said that “in line with the ECB's requirements, we accelerate the reduction of the business volume in Russia. At the same time, we continue to work on the sale of Raiffeisenbank Russia".

Without providing much detail, RBI said it “will drastically reduce Raiffeisenbank Russia's business even further in conformity with ECB requirements", adding that the "initial consequences for customers, such as restrictions in payments, have already taken effect”, and promising that “ additional steps will follow".

In 1H24, however, RBI again failed to provide any clear timeline on the selling of the Russian unit.

Previous reports claimed that the ECB demanded RBI  cut loans to customers in Russia by up to 65% and scale back all international payments from Russia by 2026.

Overall the consolidated profit of RBI excluding Russia and Belarus in 2Q24 rose 14% year on year to €661mn, beating analysts' forecast of €523mn, according to Reuters.

At the analyst call following the publication of the results Strobl said that “with the highest probability we will be able to sell about 60% [of Raiffeisenbank Rusisa]” and “we will have to keep 40%", as cited by RBC business portal.

He also mentioned that the RBI is trying to coordinate the sale of its stake in Raiffeisenbank with five institutions: the Cental Bank of Russia, the Russian government, the European Central Bank (ECB), the Austrian financial market regulator (Financial Market Authority, FMA), and the US Treasury Department's OFAC.

"The idea is to get informal approval from all these institutions I mentioned. And they have different views [on the transaction], of course. The first stage is to familiarise ourselves with the terms and conditions of the sale agreement and the potential names of the clients," the CEO said, as cited by RBC. 

In addition, Strobl noted that RBI wants to make sure that new shareholders will not fall under sanctions. “As we have to retain 40% (now the main assumption), we need an understanding that the bank will not be sanctioned afterwards or, let's say, that this probability will be very low, given that the controlling stake will go to a Russian shareholder," he said, as cited by RBC.

RBI also wants to release all the dividends to the parent structure that have been blocked in Russia in case of a spin-off deal.

According to Banki.ru rating, as of 1 July 2024 Raiffeisenbank ranked 12th in Russian banking system in terms of assets (RUB2.04 trillion) and seventh in terms of capital (RUB510.5bn).

In May the US reportedly warned RBI that its access to the US financial system could be curbed because of its continuing presence in Russia.

In particular, RBI was reportedly warned over its controversial Strabag deal, since scrapped under heavy pressure. To double down on the threats, the US Treasury has now sanctioned companies related to RBI's asset swap deal that allegedly involved sanctioned Russian oligach Oleg Deripaska.