The largest American bank operating in Russia announced that it will close down both its consumer and banking businesses in the country by the end of the third quarter.
Citigroup Inc. announced on Thursday, August 25th, and noted that it stands to incur around $170 million in charges over the next year and a half due to the closure.
This, however, is just a reiteration of company plans announced as early as April of last year. Back then, Citigroup declared it was leaving the retail banking sector as part of an even bigger exit from several foreign nations.
Last March, the company expanded the scope of its exit plans to include commercial banking in Russia following the invasion of Ukraine.
According to Titi Cole, chief executive officer of Citi’s legacy franchises, the company has explored numerous strategies to ensure the sale of its Russian retail and commercial banking businesses over the past few months. To date, however, Citigroup has not found buyers for either its retail or commercial banks in the country.
What Happens Next?
The closure of Citi’s retail and commercial banking operations in Russia is expected to affect 2,300 employees in fifteen branches across the country. Citigroup’s exit from the country is also expected to affect deposit accounts, credit and debit cards, standing loans, and investments.
Likewise, Citigroup disclosed that its Russia exposure was worth $8.4 billion as of June 30th. The figure is significantly lower than the exposure of $9.8 billion registered at the end of 2021. Approximately $1 billion of the said exposure is tied to the company’s consumer and local commercial banking services.
A recent statement from Citigroup also assured multinational clients in the institutional tier of its continued support, especially for those who are also closing down their Russian operations.
A Good Move
Some analysts see Citi’s exit from the Russian financial scene as a sensible move.
Siddharth Singhai, chief investment officer for New York-based Ironhold Capital, remarked that Citi made the right decision as lending is a high-risk business in Russia. He also pointed out that if current economic sanctions imposed by other nations continue, Russia’s economy is bound to see a major slump.
Morningstar equities strategist Eric Compton added that Citi’s exposure is for all of its outstanding positions related to its Russian operations but is separate from shutting down its branches and issuing severance for its employees.