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Sale of Citi consumer unit in Russia stalls

Sale of Citi consumer unit in Russia stalls

Citigroup Inc. was in the midst of reforming its business in Russia when the country went to war. Thus, the sale of a consumer banking unit there was stalled and now it is helping some employees to leave the country.

The events show how Vladimir Putin’s invasion of Ukraine casts uncertainty over the future of many of Citigroup’s roughly 3,000 employees in Russia — by far the largest presence of any major US bank in the country.

Changing circumstances have temporarily altered the push to exit the consumer banking unit, according to a person familiar with the matter. That raises the possibility that the unit will eventually be liquidated rather than passed on to a competitor that would continue to employ most of Citigroup’s workforce in the country. One problem is that potential stakeholders, including Russian companies like VTB Bank PJSC, are now subject to sanctions imposed by the US government.

Behind the scenes, Citigroup is telling international corporations that it is committed to providing them with financial services as they adjust their presence in Russia, in some cases suspending or closing units and looking to move money abroad. The bank’s commodity trading desk has also been one of the few that continues to finance existing deals related to natural gas from Russia.

While this could generate revenue for the bank and strengthen its presence there, the company also faces another challenge: a small number of employees are applying to go abroad. The company is helping to facilitate departures for expatriates and their dependents who want to leave, said people familiar with the matter, who asked not to be identified.

A Citigroup spokeswoman declined to comment.

Citigroup has a long history in Russia; it established its first presence in the country on the eve of the Russian Revolution in 1917. But, over the past century, it has had to withdraw and return several times, eventually establishing a presence in about a dozen cities. The bank has grown to become the 18th largest in Russia in terms of assets, with 1,200 corporate and 500,000 consumer clients.

Citi Chief Executive Jane Fraser said last week that the bank is working with clients to reduce their exposure to Russia-related losses.

Citigroup, for its part, said last month that it has about $9.8 billion in loans, assets and other exposures tied to Russia, local companies and their counterparties, as well as the Bank of Russia. As part of its risk management efforts, the company has begun hedging against depreciating foreign currencies, Chief Financial Officer Mark Mason said at the company’s investor day last week.

Still, under a severe stress scenario, the company could lose about $4.9 billion, or about half of its total exposure, Mason warned. “But it could also be much less than that, just depending on how the situation evolves, and we’ll continue to monitor it,” he said.

Source: Gestion

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