VTB’s European Unit Put Up for Sale as Sanctions Fallout Spreads
VTB’s European Unit Put Up for Sale as Sanctions Fallout Spreads
(Bloomberg) -- Russian lender VTB Bank PJSC’s European unit has been put up for sale after sanctions imposed in the wake of Moscow’s invasion of Ukraine cut it off from the parent company.
German regulators are backing the bank’s plan as they seek to avoid a messy unraveling of Frankfurt-based VTB Bank Europe SE, according to people familiar with the matter. While a sale isn’t the only option, it could be agreed at short notice, the people said, asking to remain anonymous as the matter is private.
VTB’s press department didn’t respond to emailed requests for comment. A spokeswoman for BaFin, Germany’s top banking regulator, declined to comment. The watchdog previously said that it’s monitoring VTB’s local unit closely and being given daily information on the outflows of funds.
Authorities including BaFin and the Bundesbank have been trying to avoid a scenario where the country’s deposit insurance would have to step in and burden the industry with higher costs. Sanctions against Russian banks have already sparked the unraveling of Sberbank PJSC’s European unit. While a sale would keep other lenders off the hook, sanctions are complicating that solution.
VTB and the German regulators are trying to structure the deal in a way that wouldn’t expose the buyer to sanctions violations. Another option under discussion is swapping Russian and European assets with its parent company, although that may prove complex given the parent is subject to sanctions, said the people.
Bloomberg reported earlier this month that German authorities were pushing VTB Bank Europe to sell individual assets to ensure it has sufficient liquid funds to meet deposit withdrawals.
So far, deposit outflows have been lower than authorities would have expected, said the people. That’s a notable contrast to Sberbank’s European business, which saw a run on its deposits following Russia’s invasion of Ukraine.
Germany’s deposit insurance is still reeling from the implosion of Greensill Bank AG last year that cost it 1.1 billion euros ($1.2 billion). To replenish reserves, it raised lenders’ contributions by more than 50%, a move that was one of the reasons Deutsche Bank AG Chief Executive Officer Christian Sewing had to scrap his cost target for last year. Deutsche Bank is the fund’s biggest contributor.
VTB Bank Europe’s 7.95 billion euros of assets at the end of September make it a comparatively small lender within the region. About 1.64 billion euros of that was in cash and short-term funds, while its liabilities include 4.35 billion euros of customer deposits, company filings show.
Still, the failure of even small banks can send ripples through the industry and selling a lender is often less complex than winding it down.
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