Implementation of plan to scale back RBI business in Russia following ECB request to begin in Q3

MOSCOW. May 2 (Interfax) - Raiffeisen Bank International (RBI) expects implementation of a new plan to scale back business in Russia to begin in the third quarter, with the group now analyzing what it can do, RBI CEO Johann Strobl said on a conference call with analysts.

The European Central Bank in April sent RBI a request to accelerate the process of winding down its business in Russia. Current recommendations indicate that the loan portfolio must decrease substantially by 65% by 2026 from 6.3 billion euros in the third quarter of 2023. International payments originating in Russia must also decline. RBI said that it had taken substantial measures since February 2022 to mitigate the risks deriving from its ownership of Raiffeisenbank.

"The expectation is that implementation will begin in the third quarter. We'll now draw up the plan and analyze what we can do and what the impact will be," Strobl said during the conference call, adding that the group would have a clearer understanding during the presentation of reporting for the second quarter.

The ECB's draft requirements go far beyond RBI's own plans to reduce further the Russian business and may adversely impact RBI's options to sell JSC Raiffeisenbank, RBI has said.

RBI said in the report that it was continuing to work intensely on selling or spinning off the Russian subsidiary bank. However, both alternatives require numerous approvals from various Russian and European authorities, and from the respective central banks. The group said that "the process is not entirely in RBI's own hands" and it is therefore very difficult to make a realistic forecast on when RBI will complete the deconsolidation of its Russian bank. The group estimates that current capital reserves could completely absorb even a complete deconsolidation of the Russian subsidiary bank at a hypothetical book value of zero.

"We're taking a careful approach, we're not scaling back our business in Russia very quickly and are trying to preserve the asset's value to be able to sell it. We're working on the sale of Raiffeisenbank. We have over the past two years received statements of interest from a lot of partners, Russian and foreign. It should be mentioned that the Russian interests we are talking about have not of course been sanctioned. The deconsolidation of our Russian division remains our top priority, and we believe that a sale would be the quickest and most transparent way to do this," Strobl said during the conference call.

Raiffeisenbank represents the RBI Group in Russia, as well as leasing, insurance, and management companies.

RBI is now working on another deal. The group said in December that it intended via Raiffeisenbank in Russia to buy out a stake in the Austrian construction concern Strabag SE. It was assumed it would buy 27.78% of the company from IJSC Rasperia Trading Limited - Rasperia Trading Ltd has re-domiciled to the Kaliningrad special administrative region - for 1.51 billion euros. Following the acquisition, Raiffeisenbank planned to transfer the Strabag shares to its holding company, RBI, in the form of dividends. This dividend payment is subject to approval by the Russian authorities.

Strabag said in March that it had been notified of a change in ownership of Rasperia. It was now controlled by JSC Iliadis, and Oleg Deripaska relinquished his previous (indirect) control, the concern said. This transaction requires further sanctions compliance due diligence, RBI said earlier.

"It is crucial to understand that the shares have not been frozen due to the change in control that took place in Russia. This will take more time. That's one element. The other is that we listen carefully to the communications that we receive from the authorities. This requires further assessment. These are a few things have changed [in preparation for the deal to buy the stake in Strabag]," Strobl said.