PARIS, April 11 (Reuters) - French bank Societe Generale
said on Monday it would quit Russia and take a 3 billion euros
($3.3 billion) income hit from selling its Rosbank unit to
Interros Capital, a firm linked to Russian oligarch Vladimir
Rosbank will rejoin the business empire of Potanin, the
61-year-old head of mining giant Norilsk Nickel, who
has been sanctioned by Canada https://www.international.gc.ca/world-monde/international_relations-relations_internationales/sanctions/russia_regulations-reglement_russie13.aspx?lang=eng
under Western moves against Russia's business and political
elite over its invasion of Ukraine.
He has not been sanctioned by the European Union or the
While financial terms of the deal were not announced, SocGen
said it would write off 3.1 billion euros, comprising
a 2 billion-euro hit on Rosbank's book value and the rest linked
to the reversal of rouble conversion reserves.
SocGen, the first major Western bank to announce its exit
from Russia, had previously flagged the risk of a write-off on
its 99% stake in Rosbank. Investors said its exit from Russia
removed a lot of uncertainty.
It pledged to stick to plans for a dividend and a 915
million-euro share buyback.
Morningstar analyst Johann Scholtz noted SocGen shares
rallied 7% on the news, even though Russia only accounted for
about 2% of SocGen's earnings.
"It shows what discount the market was pricing in for
potential Russian risks. This draws a line in the sand," he
SocGen "essentially gives the business away for free,"
Scholtz said, noting the book value writedown on Rosbank.
"The only way they can do that is that if they get no
material consideration," he added.
Interros agreed, however, to pay off Rosbank's subordinated
debt, approximately 500 million euros.
Overall, SocGen said the exit would shave 20 basis points
(bps) from its Tier 1 capital ratio - the core measure of a
bank's financial strength - which stood at 13.7% at the end of
2021 or 470 bps above the minimum required.
Citi analysts said the news was "a welcome surprise for the
market, given the small capital impact and the reduction of
future risk, as well as confirmation of dividend policy."
But the sale to Potanin was not universally applauded.
"It's a bit distressing that ultimately this is an enormous
gift to one of the wealthiest oligarchs," said Jerome Legras,
head of research at Axiom Alternative Investments.
France's finance ministry declined to comment when asked
whether the government had a role in negotiations. It declined
to comment on Potanins status as a sanctioned individual.
Russia's invasion of Ukraine, which Moscow describes as a
"special operation," has prompted a wave of foreign companies to
shutter their Russian businesses. Orchestrating a complete break
is, however, more difficult due to sanctions and political
Axiom's Legras said SocGen's Russian exit put pressure on
others to act. Italy's UniCredit and Austria's
Raiffeisen are still considering their futures in
Russia, while U.S. bank Citi is trying to offload a consumer
"The challenge in this environment is whom can you sell to?
It's easier to sell at a deep discount or walk away when it's 2%
of your earnings than if it is a third," Morningstar's Scholtz
said, referring to Raiffeisen which earns almost 30% of net
profits from Russia.
Asked whether SocGen's deal meant other companies could sell
their assets to Russian buyers, Kremlin spokesman Dmitry Peskov
said: "This depends on the decision of an owner of a specific
company which is leaving Russia."
SocGen said the deal would allow it to quit Russia in an "an
effective and orderly manner" and ensure continuity for
Rosbank's employees and clients.
Potanin's holding company had owned Rosbank from 1998,
before SocGen bought a stake in 2006 and merged it with its
other Russian operations in 2010. SocGen paid https://www.societegenerale.com/sites/default/files/pressrelase/06132gb.pdf
$317 million for its initial 10% stake in Rosbank.
Potanin, Russia's second richest man with $27 billion worth
of assets according to Forbes magazine estimates, worked in the
Soviet Union's foreign trade ministry and later as a banker
before establishing Interros in 1990, an umbrella for his assets
which range from metals production to a ski resort.
During the 1990s, Potanin served as Russias first deputy
Prime Minister, masterminding the first wave of privatizations
of former state-owned and himself buying several large
businesses, including a stake in mining giant Nornickel.
Following Moscow's invasion of Ukraine, which began on Feb.
24, Potanin said that confiscating assets from companies that
had left Russia would shatter investor confidence for decades.
"The most important goal of Interros is to maintain the
stability of Rosbank and create new opportunities for its
clients and partners," Potanin said in a statement.
Interros said the Rosbank deal should be closed in the next
few weeks after all necessary regulatory approvals.
French financial watchdog AMF declined to comment.
(Reporting by Tassilo Hummel, Lucy Raitano, Sujata Rao and
Editing by Carmel Crimmins, Alexander Smith and Mark Potter)