Page 19 - bneIntelliNews monthly country report Russia May 2024

2.9 European banks in Russia profits soar, pay $800mn in taxes
Western banks that have continued operations in Russia paid more than €800mn in taxes last year, marking a fourfold increase from pre-war levels, despite pledges to reduce their exposure following the full-scale invasion of Ukraine, the Financial Times reported on April 29.
The Financial Times' analysis revealed that the seven largest European banks in Russia—Raiffeisen Bank International, UniCredit, ING, Commerzbank, Deutsche Bank, Intesa Sanpaolo, and OTP—collectively reported profits exceeding €3bn in 2023.
The significant tax contributions from these banks account for about 0.4% of all Russia’s expected non-energy budget revenues for 2024 and helps sustain the Kremlin's efforts to finance the war in Ukraine. Over half of the tax payments were paid by Austria’s Raiffeisen Bank International (RBI), which is the biggest of the foreign banks in Russia and has been reluctant to leave, despite repeated promises to wind its Russian business down. The bank complains that it has been unable to find a buyer for its business.
RBI's profits in Russia surged to €1.8bn from 2021 to 2023, representing half of the Austrian group's total profit. RBI was an early entrant to the Russian market and pioneered trade finance deals after Russia began to emerge from the chaos caused by the collapse of the Soviet Union in 1991. Subsequently it built up a major western style retail banking business catering to the emerging middle class in the boom years in the noughties.
Its recent gains are primarily attributed to heightened interest rates and the constraints international sanctions have imposed on Russian banks, enhancing the competitiveness of Western banks within the country.
"RBI’s Russian profits more than tripled to €1.8bn between 2021 and 2023, accounting for half of the Austrian group’s total profit," the FT reported. Additionally, RBI also paid €47mn due to a windfall levy imposed by the Kremlin on certain companies last year.
RBI has faced criticism from the European Central Bank and the US Treasury Department for its failure to withdrawal and more recently has been threatened with punitive action if no progress is made. Although the bank has reduced its loan book in Russia by 56% since early 2022, recent job postings indicate plans for significant expansion of its client base in the region.
Other German and Hungarian banks like Deutsche Bank, Commerzbank and OTP have substantially reduced their presence in Russia. Italy’s Intesa is nearing a complete exit, though it has not yet finalised the sale of its Russian business and UniCredit has opted not to comment on its operations.
US banks also remain financially active in Russia. Citigroup, despite shutting down its corporate and retail business, became the fourth-largest taxpayer
19 RUSSIA Country Report May 2024 www.intellinews.com