(Bloomberg) -- Societe Generale SA agreed to sell its Rosbank PJSC unit to the investment firm of Russia’s richest man, taking a hit of about 3 billion euros ($3.3 billion) to exit the heavily sanctioned nation.
The Paris-based bank signed an accord to sell its entire stake in Rosbank and its Russian insurance subsidiaries to Vladimir Potanin’s Interros Capital, according to a statement on Monday. Despite the financial hit, SocGen said it’s sticking to plans for a stock buyback of 915 million euros and 2021 dividend of 1.65 euros a share.
SocGen’s decision to exit Russia is the most decisive yet among the largest European banks with operations in the nation. Both Raiffeisen Bank International AG and UniCredit SpA are also considering their future in the country. The three banks are the biggest on the continent with Russian businesses.
SocGen “previously did not state its intention to leave the country, and this should be a welcome surprise for the market,” analysts at Citigroup Inc. said in a note.
SocGen rose as much as 8.2% in Paris trading on Monday as the divestment removed uncertainty over the impact of the bank’s Russia business. The sale is expected to close in the coming weeks, subject to approval by regulators and antitrust authorities, the bank said.
Potanin, 61, is the world’s 43rd richest person with a net worth of $29.6 billion, according to the Bloomberg Billionaires Index. He is president of MMC Norilsk Nickel PJSC, which accounts for about 40% of global palladium output and 10% of refined nickel, and has a stake in Russian company Petrovax Pharm.
Potanin had avoided sanctions by Western governments until Canada recently added him to its list.
SocGen will have a 2 billion euro write-off on the net book of the divested activities and an exceptional non-cash item of 1.1 billion euros related to the reversal of the conversion reserve in the group’s income statement. The disposal will have an impact of about 20 basis points on the bank’s CET1 ratio, it said.
SocGen Chief Executive Officer Frederic Oudea last month signaled the bank planned to stay flexible in Russia, stopping short of joining European rivals pledging to review or exit their business in the country after the invasion. At the same time, the bank had taken a cautious stance since the onset of the war and was one of the earliest lenders to halt the finance of commodities trading from Russia.
What Bloomberg Intelligence Says:
Societe Generale’s full exit from its Russian unit, Rosbank, with a CET1 impact comfortably below prior guidance and 2021 payout plans confirmed, is a welcome relief. A 2 billion-euro net book write-off and non-cash item are both comfortably manageable.
-- Jonathan Tyce, BI banking analyst
SocGen’s Russian business generated 2.7% of last year’s profit and accounts for 1.7% of the bank’s total exposure. Local activities are mainly exposed to retail and large corporate clients.
Peers BNP Paribas SA and Credit Agricole SA previously announced they would no longer take new business in Russia, joining a growing group of lenders that are pulling back from the country. Other European banks with local operations have started to reconsider their presence in the country as the war drags on. Intesa Sanpaolo SpA has announced a strategic review of its Russian business.
In Switzerland, Credit Suisse Group AG signaled it would take a close look at its wealth management business in Russia and eastern Europe. UBS Group AG halted new business in the nation and former Chairman Axel Weber said he saw no future for many international banks in Russia even in case of a cease-fire.
Outside finance, companies across industries are reconsidering their presence in the nation. French carmaker Renault SA is halting operations at its Moscow plant and preparing for an exit, while Nestle SA, the world’s largest food maker, said it’s suspending the vast majority of its manufacturing in Russia.
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