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Italy’s Intesa Bank Is on Track To Exit Its Russian Operations Fully LeapRate

Intesa Sanpaolo, Italy’s largest bank, is divesting its operations in Russia, although “bureaucratic hurdles” have delayed the finalisation of the deal, according to the bank’s CEO. Reports by Reuters in August indicated that Intesa was on the verge of receiving approval to hand over its Russian operations to a local management team.

The move was further supported in September when President Vladimir Putin issued a decree allowing for transactions involving these assets. In an interview with Bloomberg Television, CEO Carlo Messina revealed that Intesa has significantly reduced its exposure in Russia to a “minimal” level. Yet, the bank has struggled to wholly disentangle itself from its subsidiary there.

“We are making efforts,” he stated, acknowledging the involvement of local management and other parties in the transaction, complicating the divestiture process.

The imposition of Western sanctions on Russia following its invasion of Ukraine two years ago has narrowed the field of potential purchasers for Western firms seeking to exit Russia. “In Russia, you encounter bureaucratic procedures necessary for this transaction. As a result, we continue to hold our exposure there,” Messina commented.

Intesa reported in its full-year financial statements on Tuesday that it had cut its cross-border exposure to Russia by half the previous year, bringing it down to 500 million euros after accounting for provisions and credit export guarantees. Loans to customers by its local branch were also reduced by 50% in 2023, amounting to 100 million euros after adjustments for write-downs.

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Messina pointed out that, unlike other banks for which the Russian market was a key profit source, Intesa reported no net profit from its Russian operations on a consolidated basis.

UniCredit, Italy’s second-largest bank, has similarly been working to lessen its Russian exposure, operating a commercial bank in the country, in contrast to Intesa’s focus on serving corporate clients. UniCredit’s 2023 financial disclosures anticipated a 300 million euro reduction in its net interest income for the following year due to downsizing its Russian operations.

The bank achieved a 90% reduction in cross-border exposure to Russia last year. Also, it halved the customer loans in its Russian branch, which reported a net profit of 644 million euros, compared to a net loss of 221 million euros in 2022.

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Written by : Editorial team of BIPNs

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