Russia’s top lender Sberbank exits Europe due to sanctions, collapses on London stock exchange

• Sberbank had around $14.42 billion in assets in Europe at the end of 2020 

• The bank said it has sufficient capital to pay to all of its depositors

Russia’s largest lender Sberbank decided to pull out its operations from the European market, blaming large cash outflows and expressing concern for the safety of its employees and properties amid the Russia-Ukraine crisis.

The state-controlled Sberbank’s share on London Stock Exchange plunged nearly 88.5% on Wednesday. The financial institution has lost 99.9% of its value since the start of the year.

Russia’s domestic stock market in Moscow has been closed for three consecutive days as authorities attempt to stem the bleeding in local assets.

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Although Sberbank said its European subsidiaries had faced “abnormal cash outflows,” the bank added that it has sufficient capital to be able to make payments to all of its depositors.

Sberbank has been operating in Germany, Austria, Croatia, and Hungary, among other countries, and had European assets worth 13 billion Euros ($14.42 billion) in 2020.

Inevitable move

The move was somewhat expected after the European Central Bank (ECB) ordered Sberbank to close its European arm.

ECB suggested that the Russian bank will “likely to fail” after Moscow invaded Ukraine, triggering a run on deposits.

The United States, the European Union, and the United Kingdom have recently intensified sanctions against Russia’s institutions, barring banks from the SWIFT international payment system.

Moreover, the Russian Ruble has dropped around 30% over the last week after the Western nations enforced sanctions on the financial institutions of Russia.

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Sberbank’s announcement comes with a record annual earnings report for 2021. The yearly net profit jumped 64% compared to 2020.

It is unlikely Sberbank will reach such earnings levels again in the near future after departing from the European market as it grapples with sanctions.

Picture Credit: The Guardian