Citi to wind down its Russia retail presence

Dive Brief:

  • citi will wind down its consumer-banking and local commercial-banking operations in Russia, the bank said Thursday.
  • The bank expects to incur roughly $170 million in costs — much of that over the next 18 months, and largely driven by restructuring and vendor termination fees, it said.
  • The wind-down is expected to affect about 2,300 employees and 15 branches, the bank said.

Dive Insight:

Citi’s Thursday comes 16 months after the bank announced it planned to exit retail banking in Russia and a dozen other Eastern Hemisphere markets, and instead focus on four markets with high returns: Singapore, Hong Kong, the United Arab Emirates and London. The bank in January said it also planned to drop its Mexico retail-banking footprint.

Counting Russia, the bank now has an exit strategy in place for 11 of the 14 markets — with Mexico, China and Poland still outstanding. Citi has found buyers for the vast majority of those overseas networks. South Korea is the only other market among the 14 from which Citi has had to wind down its operations — a prospect that left the bank expecting to take charges from between $1.2 billion and $1.5 billion.

Russia’s invasion of Ukraine in February complicated Citi’s exit plans, although at least three privately owned Russian companies — Expobank, Reso-Garantia and Rosbank — were courting Citi’s assets as of early last month.

“We have explored over multiple strategic options to sell these businesses the past several months,” Titi Cole, Citi’s CEO for legacy franchises, said in a statement Thursday. “It’s clear that the wind-down path makes the most sense given the many complicating factors in the environment. We are focused on supporting our impacted colleagues, clients and partners during this period of transition.”

Citi will continue to support its multinational institutional clients, particularly those winding down their own operations in Russia, the bank said. Citi added that it will continue to pursue sales of certain Russian consumer-banking portfolios.

The bank will not close its investment banking and transaction services operations in the country, but it is reducing its exposure and won’t take on new customers, it said.

“Today’s decision is part of our continuing efforts to reduce our activities in Russia,” David Livingstone, Citi’s CEO of Europe, Middle East and Africa, said Thursday. “It is aligned with other actions, including limiting our service offering, reducing our exposures, and not soliciting any new business or clients.”

The bank warned investors shortly after the Ukraine invasion that had $9.8 billion in exposure to Russia at the end of 2021 — a figure it reduced to $7.9 billion at the end of March. But that total climbed to $8.4 billion in the second quarter because of a 40% rise in the ruble compared to the dollar.

The wind-down announced Thursday should cut roughly $1 billion from that total exposure, the bank said. Citi’s CFO, Mark Mason, indicated in March that the bank’s losses, even under a “severe stress scenario,” would top out around $4 billion.

Citi opened its Russia retail bank in 2002 and aimed it at wealthier clients. It counts roughly 500,000 customers in the region, according to The Wall Street Journal. Despite the 18-month timeline the bank mentioned Thursday, it may take two years or more to fully wind down deposits, mortgages, credit cards and small-business loans, the Financial Times reported.

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