Société Générale will take a €3.1 billion hit after agreeing to exit Russia by selling Rosbank to an investment company founded by billionaire Vladimir Potanin.
The French bank said on Monday it was selling its entire 99.98 per cent stake in Rosbank, as well as its Russian insurance operations, to Potanin's Interros Capital after coming under scrutiny over its large exposure to the country following Russia's invasion of Ukraine.
Along with Austria's Raiffeisen Bank and Italy's UniCredit, SocGen is one of the western European financial institutions with the largest presence in Russia, and the first of the three to have found a way to sell out.
SocGen, which first bought a stake in Rosbank from Interros in 2006 before cementing control two years later, said it would write off of about €2 billion for the net book value of the divested activities and a further non-cash write-off of €1.1 billion.
“The closing of this operation should occur in the coming weeks,” SocGen said, adding it aimed to exit the country “in an effective and orderly manner”. SocGen shares were up more than 6 per cent in early trading.
Among Interros's other investments are stakes in metals company Norilsk Nickel, which Potanin had long fought for control over. Potanin, one of Russia's richest men, has been sanctioned by Canada.
SocGen said Interros would repay a subordinated debt loan it had granted to Rosbank as part of the deal. It had previously said the loan amounted to €500 million.
The group also said its core tier one capital ratio – which stood at 13.7 per cent at the end of December – would take a 20 basis point hit from the sale, adding that it still stood well above minimum regulatory thresholds.
"The sale of the Russian operation at a manageable impact to its CET 1 ratio is positive," said RBC analyst Anke Reingen. "It should remove the overhang" of negative sentiment from investors.
SocGen also said it would maintain its 2021 dividend payout plans and carry on with a €915 million share buyback.
The Russian setback came just as SocGen was making headway with its latest turnround plan under long-serving chief executive Frédéric Oudéa, who had sought to stabilise the bank after a 2008 rogue trading scandal.
European banks have been scrambling to find ways to leave the Russian market following the February 24th invasion and the subsequent imposition of tough sanctions by western governments. – Copyright The Financial Times Limited 2022