Nordea Pledges to Keep Russian Unit Even Without Local Clients

(Bloomberg) -- Nordea Bank Abp will retain its Russian operations even after deciding to stop lending to local companies and focus on Scandinavian clients.

The lender won’t accept new Russian clients and the current 2 billion-euro ($2.3 billion) corporate loan portfolio will be gradually reduced, but there’s no plan to close the office, Mikhail Polyakov, chief executive officer of Nordea’s Russian unit, said in an interview. Like other offices outside Nordea’s main markets, the Russian operation will focus on working with customers from Scandinavian countries, he said.

"By the end of last year, it finally became clear that lending to Russian companies ceased to bring the profits we had expected," Polyakov said. “The demand for loans, especially in foreign currency -- and our main currency is the euro -- is very limited, while the risks are high. That makes lending not very effective even with cheap funding."

The move comes as demand for foreign currency loans in Russia is falling amid international sanctions against some of the biggest companies and slow economic growth. One of Nordea’s biggest recent transactions was a loan to aluminum giant United Co. Rusal that was approved in January 2018, about three months before the company was added to the U.S. sanctions list. The restrictions against Rusal were lifted last month.

Nordea reduced its exposure to the country by more than 60 percent since U.S. sanctions were first imposed on its companies in 2014, according to the Helsinki-based bank’s annual report. Last year, the level fell by 19 percent to 1.94 billion euros.

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