- Sberbank quits European market after ECB order
- Says faces cash outflows, threats to staff and property
- Says has enough resources to pay all depositors
- 2021 net profit up 64% to record 1.25 trillion rubles
Following Russia’s invasion of Ukraine and Western sanctions, Russia’s largest lender Sberbank (SBER.MM) has been experiencing threats to its staff and big cash outflows which have triggered it to quitting almost all European markets.
After the bank’s European arm closure was ordered by the European Central Bank (ECB), the move seemed inevitable. The bank warned that a run on deposits happened sparked by the invasion which Moscow calls a “special operation.”
This news came on March 2 as record annual profits for 2021 were reported by the state-controlled Sberbank. Following an order from Russia’s central bank, which is seeking to preserve foreign currency, the lender said it was no longer able to supply liquidity to European subsidiaries. However, it said assets and capital were adequate to pay all depositors.
Due to unprecedented steps by the West to isolate Moscow, including the exclusion of some of its banks from global payments system SWIFT and sanctions on its central bank, some Russian businesses are facing pressure, which is highlighted by the move.
On Wednesday, Elvira Nabiullina, the Russian central bank governor, said the country’s economy faced an extreme situation, and to ensure the financial system could cope with any shock, she was doing everything possible. The bank said in a statement:
“In the current situation, Sberbank has decided to leave the European market. The group’s subsidiary banks have faced abnormal cash outflows and threats to the safety of its employees and branches.”
As of Dec. 31, 2021, Sberbank had European assets worth 13 billion euros ($14.4 billion) and operations in countries including Croatia, Hungary, Germany, and Austria among others. After sanctions were imposed, European subsidiaries experienced a liquidity crisis, resulting in the bank losing control of those units in the first quarter of the year.
In a deal worth around 500 million euros, Sberbank had said in November that it planned to finalize the sale of operations in Herzegovina and Bosnia, Slovenia, Hungary, Croatia, and Serbia in 2021. The Slovenian business was being acquired by the Slovenian bank NLB (NLBR.LJ).
For now, no update on the other potential deals was given by Sberbank.
The bank’s business in Switzerland was not affected by the exit, which it said was continuing to operate as usual.
The net profit for Sberbank recorded for 2021 soared 64% year on year to 1.25 trillion rubles ($12.38 billion). Its net interest income stood at 1.8 trillion rubles and return on equity for the year was 24.2%.
These results were described as “outstanding,” by CEO German Gref, who has been quiet since the crisis unfolded, but said the focus was now on “the new challenges that the Russian economy and the financial sector is facing.”
To discuss the results, the bank canceled its investor call. The Moscow Exchange has sought to prevent capital outflows from Russian assets and has halted trading on stocks. But on Wednesday, Sberbank’s depositary receipts in London fell more than 90% to 1.7 cents.