Raiffeisen, a European banking group, has revealed a decline in profitability in its Russian operations. The group’s latest report showed a 5.7% decrease in profitability from January to September, with operating income down by 19.2% to €2.1 billion ($2.2 billion). The bank’s loan portfolio also decreased by two thirds over the nine-month period, amounting to €6.3 billion.
In the third quarter, Raiffeisen’s profit in Russia after tax amounted to €339 million, which is 2.3 times less than the same period last year. Revenue for the quarter was €331 million, with operating income standing at €574 million.
Raiffeisen is one of the few major Western lenders still operating in Russia. The bank plays a crucial role in the Russian economy as it facilitates euro and dollar payments to and from the country. It is one of only two foreign banks on the Russian central bank’s list of 13 systemically important credit institutions, the other being Italy’s UniCredit.
Earlier this year, Raiffeisen announced its plans to spin off its Russian business by September due to mounting pressure from Western governments. The RBI Group, the bank’s owner, has faced demands from the US and EU to expedite its exit from Russia. The European Central Bank (ECB) has also been pressuring Raiffeisen to withdraw from the Russian market.
Initially, the bank had planned to sell its local unit or withdraw it from the group structure by September. However, in August, RBI Governor Johann Strobl stated that the process had been postponed until the end of the year. In September, Raiffeisen filed an application to register a new logo in Russia, signaling its intention to expand the capabilities of the trademark.
Raiffeisen’s declining profitability in Russia reflects the challenges faced by Western lenders operating in a country subjected to economic sanctions. Despite these challenges, the bank’s presence in Russia has provided vital financial services and support to both Russian businesses and the country’s overall economy.
As Raiffeisen navigates its exit strategy from the Russian market, the future landscape for Western lenders in the country remains uncertain. The impact of geopolitical tensions and economic sanctions continues to shape the banking sector’s operations, profitability, and relationship with Russia.