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HSBC closes in on deal to sell Russian business to Expobank

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HSBC is in talks to sell its Russian business to Expobank, in a deal that would add to the exodus of western lenders that has led to a rapid consolidation of the country’s banking industry.

The bank’s Russian subsidiary is a small part of Europe’s largest lender, with assets of Rbs89.9bn ($1.4bn) and almost 250 employees as of the end of June 2021.

Having opened a Russian retail banking operation in 2009 only to close it two years later, HSBC’s operations in the country now focus on providing services to domestic and multinational companies.

Expobank has experience taking over foreign banks’ Russian operations. It was Barclays’ Russian subsidiary until its current owner, Igor Kim, bought it from the UK lender in 2011. It subsequently acquired the Russian operations of Royal Bank of Scotland in 2015 and the local business of Turkey’s Yapı Kredi in 2017.

Last week, the Financial Times reported that Citigroup, which first announced its intention to leave Russia last summer, was in talks with privately owned Russian companies including Expobank and insurance company Reso-Garantia over a sale.

HSBC’s talks with Expobank are at an advanced stage, according to people familiar with the matter. The talks were first reported by Bloomberg.

HSBC declined to comment, while Expobank did not immediately respond to a request for comment.

Although HSBC’s Russian business is small, the bank has come under pressure from UK members of parliament to follow the lead of Wall Street lenders and announce a full-scale exit from the country.

The bank has previously said it is fully implementing sanctions and will not take on new business in Russia, but has so far stopped short of pulling out.

In March, a cross-party group of more than 60 MPs asked the trustees for the parliamentary pension scheme to sell its shares in HSBC, citing the company’s continued exposure to Russia.

Western banks have been forced to reverse decades-long Russian expansion following Moscow’s invasion of Ukraine, with some lenders contemplating heavy losses on their exits.

Société Générale took a €3.1bn hit when it agreed to sell its Russian Rosbank subsidiary to oligarch Vladimir Potanin’s Interros investment company in April.

The French bank, which first bought a stake in Rosbank from Interros in 2006 before cementing control two years later, said it would write off about €2bn for the net book value of the divested activities and a further non-cash write-off of €1.1bn.

Citi is also considering an offer from Rosbank, but its ability to complete any deal has been thrown into doubt after the UK recently imposed sanctions on Potanin. He remains free of US and EU sanctions, however.

Italy’s UniCredit and Austria’s Raiffeisen have so far resisted offers to sell their Russian businesses, preferring to hold on to assets they feel are temporarily undervalued.

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