Raiffeisen wants to swap EUR400mn for Sberbank in “financial prisoner exchanging”

Raiffeisen Bank wants to exchange EUR400mn worth Russian profits against Sberbank’s European frozen cash. This is a plan that demonstrates the Austrian lender’s efforts to reduce its exposure on the Russian market.

According to three people involved in the discussion, the swap deal was presented at a Raiffeisen board conference last week. It involves Sberbank getting roubles from Raiffeisen’s Russian subsidiary. These Russian subsidiaries are prohibited from leaving the country due to capital controls imposed the Kremlin.

Raiffeisen will in turn, take over the legacy cash pile of sanctioned legacy assets held by Sberbank’s European branch.

One of the people who helped to structure the deal stated, “Consider it the financial equivalent of cold-war prisoner exchange.”

This creative solution will raise eyebrows among policymakers and politicians in western countries because it would allow Sberbank, Russia’s largest lender, to get some of its frozen European cash. Any deal would need approval from regulators in Washington and Moscow.

Sberbank was advised by a source that the US and EU authorities can be complicated in issuing permission for the finalization of the deal.

They are transferring cash. . . He said that the sanctioned entity was to be notified.

Raiffeisen spokesperson said that the swap was a “theoretical consideration”. Austrian banks were “investigating multiple options” to reduce Russia exposure. They stressed that all measures would be in compliance with sanctions.

Raiffeisen is a perfect example of the problems foreign organizations with Russian operations face since Vladimir Putin’s invasion of Ukraine last January. This Vienna-based institution, which has a total of 1.2 billion assets, is Russia’s largest western lender and made record profits last year.

The plan would see the roubles transferred from Raiffeisen’s Russian subsidiary to Sberbank Moscow. Raiffeisen in Vienna would receive euros equivalent to the amount in escrow accounts of Sberbank’s European former arm, which is currently being wound down.

The people insist that no money or foreign currency would be sent to Russia across borders and therefore, there would not be any violation of sanctions.

Austria’s Falter magazine first reported the Raiffeisen swap offer.

Ithuba Capital in Vienna, founded by Willi Hmetsberger, UniCredit’s former head for markets, has been working with advisors to create the plan. They believe that it could serve as a model for other western companies looking to exit Russia. Ithuba declined comment.

The Kremlin issued strict rules to western businesses operating on its territory late last year. They made it impossible for them not to sell their subsidiaries and prohibited the repatriation profit of certain sectors.

Executives at Raiffeisen have expressed dismay at their current situation. Other western business leaders are less clear. Philip Morris’ chief executive stated last week that he would rather keep his Russia business than sell it at a loss to moral pressure from politicians.

Sberbank didn’t comment on the deal.

Since the beginning of June, the European branch of Russian banks has been in liquidation. It has sold most of its loan portfolios to European counterparts.

The legacy holding company in Vienna holds cash and other assets that were earned through such sales or the winding up of other business operations. It is worth as much as EUR400mn.