According to the latest data, UniCredit has one of the largest exposures to Russia of any multinational lender. At the end of December, it had 8.6 billion euros of loans and 4.5 billion euros of cross-border exposure with Russian customers. Yet the Italian lender is still considering an exit from Russia. Executives said they would not increase their investments in the country. They would also not close down their Russian branches.
It is not clear how much it will cost UniCredit to exit from Russia. The bank has a EUR8 billion loan portfolio, partly financed in the country by deposits. However, it is estimated that an exit from Russia could cost up to EUR1.9 billion. Its plan to buy back its shares in the Russian market is also dependent on core capital remaining at 13%. If the Russian economy continues to weaken, it could cost UniCredit as much as EUR5.5 billion.
In order to ensure the stability of its business in Italy, UniCredit is reviewing its Russian operations. A costly exit would be unavoidable, if the company does not make the right decision. Other European banks are considering exiting the Russian market as well. And UniCredit’s CEO Andrea Orcel says that the exit from Russia cannot and should not be done overnight.
In a statement on March 17, Goldman Sachs Group Inc. said it is scaling down its operations in Russia and has transferred some staff members to Dubai. On the other hand, JPMorgan Chase & Co. and Deutsche Bank also announced plans to withdraw from the country. The move follows similar calls from the US Congress and California’s governor. And if this plan is implemented, it could lead to further instability in the region.