SocGen sever Russia’s ties with the sale of Rosbank to oligarch Potanin

PARIS, April 11 (Reuters) – French bank Societe Generale said on Monday it would leave Russia and take a € 3 billion ($ 3.3 billion) revenue cap by selling its Rosbank unit to Interros Capital, a company associated with the Russian oligarch Vladimir Potanin.

Rosbank will once again join Potanin’s business empire, the 61-year-old leader of mining giant Norilsk Nickel (GMKN.MM), which has been sanctioned by Canada under Western crackdown on Russia’s business and political elite over its invasion of Ukraine.

He has not been sanctioned by the EU or the US.

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While the financial terms of the deal were not announced, SocGen said Interros had agreed to pay off Rosbank’s subordinated debt. It said the framework for its capital buffers was only 20 basis points and that it stuck to its stock buybacks and dividend plans.

SocGen had previously highlighted the risk of a write-off of its 99% stake in Rosbank, and investors welcomed the removal of uncertainty. Analysts said Interros probably paid little or nothing for the company. Read more

“Russia contributes only 2% of earnings, yet Socgen’s share price rose 7% today, even though it essentially gives the business away for free,” said Johann Scholtz, an analyst at Morningstar.

“It shows what discount the market priced for potential Russian risks.”

But the sale to Potanin was not universally welcomed.

“It’s a little disturbing that this is ultimately a huge gift to one of the richest oligarchs,” said Jerome Legras, head of research at Axiom Alternative Investments.

France’s finance ministry declined to comment when asked if the government had a role in the negotiations. It declined to comment on Potanin’s status as a sanctioned person.

Russia’s invasion of Ukraine, which Moscow describes as a “special operation”, has caused a wave of foreign companies to close their Russian businesses. However, organizing a complete break is more difficult due to sanctions and political sensitivities. Read more

Legras at Axiom Alternative Investments said SocGen’s Russian exit put pressure on others to act.

The logo of Societe Generale Private Banking is seen in an office building in Zurich, Switzerland on October 13, 2016. REUTERS / Arnd Wiegmann

The French bank is the first among major banks to leave, with European rivals including Italy’s UniCredit (CRDI.MI) and Austria’s Raffeisen (RBIV.VI) still considering their future in Russia. Read more

Asked if SocGen’s deal meant other companies could sell their assets to Russian buyers, Kremlin spokesman Dmitry Peskov said on Monday: “This depends on the decision of an owner of a specific company leaving Russia.”

PROPER EXIT

SocGen said the agreement would allow it to leave Russia in an “efficient and orderly manner” and ensure continuity for Rosbank’s employees and customers.

Potanin’s holding company had owned Rosbank since 1998, before SocGen bought a stake in 2006 and merged it with its other Russian operations in 2010. SocGen paid $ 317 million for its original 10% stake in Rosbank.

Potanin, Russia’s second-richest man with assets worth $ 27 billion, according to Forbes magazine, worked in the Soviet Union’s Foreign Ministry and later as a banker before establishing Interros in 1990, an umbrella for his assets ranging from metal production to a ski resort.

During the 1990s, Potanin served as Russia’s first deputy prime minister and was behind the first wave of privatizations of former state-owned and even bought several large companies, including a stake in mining giant Nornickel.

Following Moscow’s invasion of Ukraine, which began on February 24, Potanin said the confiscation of assets from companies that had left Russia would shatter investor confidence for decades.

“The key objective of Interros is to maintain Rosbank’s stability and create new opportunities for its customers and partners,” Potanin said in a statement.

Interros said the Rosbank agreement should be closed in the next few weeks after all necessary regulatory approvals.

The French financial watchdog AMF declined to comment.

($ 1 = 0.9152 euros)

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Reporting by Tassilo Hummel, Lucy Raitano and Reuters Journalists; Edited by Carmel Crimmins and Alexander Smith

Our standards: Thomson Reuters Trust Principles.

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