Citigroup, in the midst of overhauling its businesses in Russia when the country went to war, has seen efforts to sell a consumer banking unit there stall and is helping some employees transfer abroad.
The moves show how Vladimir Putin’s invasion of Ukraine has quickly made the future less certain for many of Citigroup’s roughly 3,000 workers in Russia — by far the largest presence of any major U.S. bank in the country.
The shifting circumstances have temporarily upended the push to dispose of the consumer banking unit, according to a person familiar with the matter. That raises the prospect the unit may eventually be wound down instead of passed to a competitor that would keep employing most of Citigroup’s workforce in the country.
One problem is that potential suitors including Russian firms such as VTB Bank PJSC are now subject to sanctions imposed by the U.S. government.
Behind the scenes, Citigroup is telling international corporations that it’s committed to providing them financial services as they adjust their presence in Russia, in some cases suspending or shutting units and looking to move money overseas. The bank’s commodities-trading desk has also been one of the few to continue to finance existing deals involving natural gas coming from Russia.
While such work could generate revenue for the bank and buoy its presence there, the firm is also facing another challenge: A small number of employees are asking to move abroad. The company is helping facilitate departures of expatriates and their dependents who want to leave, people familiar with the matter said, asking not to be identified discussing personnel matters.
A spokeswoman for Citigroup declined to comment.
Citigroup has a long history in Russia, establishing its first presence in the country on the eve of the Russian Revolution in 1917. But, over the past century, it has had to retreat and return multiple times, ultimately establishing a presence in about a dozen cities. The bank has grown to become Russia’s 18th largest by assets, with 3,000 corporate and 500,000 consumer clients.
That includes 600 clients of its so-called global-subsidiaries group — which provides regional services to the local subsidiaries of many of the world’s largest corporations. Chief Executive Officer Jane Fraser said last week that the bank is working with clients to reduce their exposure to losses tied Russia.
“There is a big unwind going across different industries,” Fraser said in an interview with CNBC.
Citigroup, for its part, said last month it has about $9.8 billion of loans, assets and other exposure tied to Russia, local companies and their counterparties, as well as to the Bank of Russia. As part of its risk management efforts, the company began hedging against the depreciation of foreign currencies, Chief Financial Officer Mark Mason said during the company’s investor day last week.
Still, under a severe stress scenario, the company could lose roughly $4.9 billion, or about half of its total exposure, Mason warned. “But it could also be a lot less than that, just depending on how the situation evolves, and we’ll continue to monitor it,” he said.
After the failed foray into Russia in the early 20th century, Citigroup wasn’t able to reenter until the 1970s. The company received permission to establish a limited presence in what was then the Soviet Union in 1973, and opened a branch in Moscow a year later. Amid rising tensions with the U.S., the lender
Citigroup didn’t return until 1993, making it one of the first international banks to enter the Russian market following the collapse of the Soviet Union. Initially, it focused on commercial banking and financing for government agencies. In 2002, it established a retail banking presence.
The company has since built out services for Russia’s wealthiest consumers. The firm opened an upscale office on the 10th floor of a tony office building in Moscow’s financial and shopping district in 2017. Two years later, the lender’s head of premium banking in Russia said Citigroup was adding 100 individual customers every month.
— With assistance from Dan Reichl.
