EU banks in Russia: next in line for asset-grab?

But after 16 months of Russian aggression, Austria's Raiffeisen Bank International, Dutch lender ING, Germany's Commerzbank and Deutsche Bank, Hungarian lender OTP, Italy's Intesa SanPaolo and Unicredit, and Swedish bank SEB are among those still there.

OTP, Raiffeisen, and Unicredit specialise in consumer banking and have thousands of employees in branches across Russia.

Commerzbank, Deutsche Bank, ING, Intesa, and SEB focus on commercial banking and have just a few hundred staff in Russia.

The dangers are growing daily as the war empties Putin's treasury and strains loyalties.

Some 10 days ago, Putin snatched the Russian factories of EU food-and-drink makers Carlsberg and Danone and gave them to his cronies.

And given the nervous atmosphere, most of the EU banks declined to say if they feared they might be next.

Commerzbank was the only one who answered EUobserver's question directly, saying: "We are monitoring the situation in Russia very closely so that we can react quickly to changes in this very dynamic environment".

Others replied in more general terms by saying they were "de-risking".

A source at Intesa, who asked not to be named, said the lender had "slashed" financial exposure to Russia by €3bn in the past six months to "below 0.2 percent of the group's total customer loans".

Raiffeisen said it would survive even if worse came to worst.

"In all scenarios, including in the event the RBI Group deconsolidated Raiffeisenbank Russia at zero, the RBI Group's CET1 ratio will remain robust," its spokeswoman said.

A 'CET1' ratio measures how much cash a lender has in its back pocket to cope with financial shocks.

For their part, Russian experts were divided on whether Putin would take the hammer to his European piggy banks.

For Andrey Barkhota, an independent financial consultant in Moscow, it would make no sense.

"We won't see nationalisation of foreign lenders," he told EUobserver.

"Banks such as Raiffeisen, OTP, Unicredit are a small part of the Russian market, but they are drivers in terms of best practice, services, technology," he said.

"If they were nationalised, they'd become like Russian banks, with comparably low return on equity, and a burden on the [Russian] central bank," he added.

German investors' history of "pragmatism" vis-à-vis Russia also made its banks "more safe", Barkhota added.

And a former Deutsche Bank employee, who asked not to be named, corroborated the idea of a special relationship.

"Deutsche Bank can have direct access to Putin … if they needed to organise something, it could be done quite fast," he said.

But for Ivan Fedyakov, the founder of Moscow-based consultancy firm InfoLine: "Foreign banks in Russia face similar risks [to Danone and Carlsberg]".

"Any business of foreign investors in Russia could face being taken over by the government without any compensation," he said.

EU banking operations in Russia were too small to be untouchable and burning financial bridges with the West might play into Putin's hands politically speaking, Fedyakov added.

"None of the European banks, such as Deutsche or Raiffeisen, are systemically important to Russia. Their [combined] market share in Russia is less than 10 percent," he said.

"The continued operation of these banks in Russia is beneficial [chiefly] to the Russian elites, as it allows them to continue transferring funds abroad," he added, after EU sanctions disconnected most Russian lenders from the Swift international payments grid.

"Any business in Russia is at risk — it's an obvious fact," Agiya Zagrebelska, from the National Agency on Corruption Prevention (NACP) in Kyiv said.

Reputation risk?

But even if the optimists are right, that still leaves the other danger — of being seen as a "sponsor" of Putin's horrifying war.

That's what Ukraine has called OTP and Raiffeisen, creating such stigma that the Hungarian government is vetoing EU military and financial assistance to Kyiv unless it first clears its bank's name.

"The modern world demands not just quality but also social responsibility from brands," Zagrebelska said.

The risk of opprobrium is seeing the banks distance themselves from Russian clients and make public promises to exit in future.

"We condemn the Russian invasion of Ukraine in the strongest possible terms and support the German government and its allies in defending our democracy and freedom", a Deutsche Bank spokeswoman told EUobserver.

"We are in the process of winding down our remaining business in Russia … there won't be any new business in Russia," she added.

Commerzbank "predominantly supports German corporate clients in their Russian business" and has "discontinued new business", it said.

The Dutch lender said: "Immediately after the invasion of Ukraine, ING announced that we would no longer do new business with Russian customers".

Sweden's SEB also said: "Our operations in Russia have ... focused solely on supporting subsidiaries of our Nordic, German, and British corporate customers".

"The process to wind down the remaining operations is ongoing," it added.

Intesa is "fully committed to reducing its Russian exposure to zero", a source at the bank also said.

And even Raiffeisen was "reducing business activity in Russia" and studying all options "up to and including an exit" from the Russian market.

The banks cited a variety of reasons why they're still there after 16 months.

These included onerous Russian exit-bureaucracy and "duty of care" for staff and customers.

Raiffeisen "has a responsibility to preserve the integrity of local operations in Russia, employing over 9,000 people," its spokeswoman said.

"A bank can't just close its business and throw away the computers. You must find someone else to service your clients," the former Deutsche Bank employee said.

"Unilaterally ending the relationship with Russian companies effectively means giving away the money [outstanding loans], which seems particularly undesirable," ING added.

OTP said: "A disorderly exit is out of the question for a commercial bank, as it represents a one-off, very significant contribution to the Russian economy, which could justifiably be criticised by the public, and it represents a significant reputational risk for the whole banking group."

What does 'winding down' mean?

But for Ukraine, some of the banks' actions speak louder than words.

Raiffeisen, like the others, told EUobserver last week it was "committing to further reducing business activity in Russia".

But it also boasted, via its Russian Telegram channel in June, that it was launching a brand new postal delivery service for customers' debit cards.

Raiffeisen and OTP have done nothing to oppose their staff's mobilisation into the Russian army, with a 33-year old Raiffeisen IT expert, Timur Izmailov, killed by Ukrainian mortar fire last year.

And OTP has given Russian soldiers on the front line preferential-rate loans, Ukraine says.

"Perhaps that's what they call 'duty of care'," the NACP's Zagrebelska said.

Meanwhile, a less flattering reason why some EU banks are clinging to Russia is simple greed.

Those that don't publish the figures anyway declined to tell us how much money their Russian operations made in the first year of war.

And while ING, OTP, and Unicredit's Russian profits fell in 2022, Deutsche Bank and Intesa's Russian income quintupled and Raiffeisen's tripled.

"In the absence of competition, remaining foreign banks were able to sharply increase fees," Fedyakov, the Russian consultant said.

"The freeze on bank deposits by the Russian central bank last February [limiting withdrawals to €10,000] also lets these banks use the Russian population's money in their accounts," he added.

Bigger profits meant annual bonuses of up to 30 percent of wages for the middle- and top-ranked European bank executives still working in Moscow, Russia's Barkhota said.

And even those banks whose 2022 Russian profits were down likely had an eye on long-term gains.

"The situation is quite tough now, but no one believes that the conflict will last more than a further two years, and when the environment is normalised, we'll see a return of foreign investors," Barkhota said.

Many of those who said they were running down Russian loan-books to zero were being disingenuous, the former Deutsche Bank employee added.

"This kind of language, 'We're winding down', means 'We're not really going anywhere', because you can be shrinking for ever without reaching zero," he said.

"Deutsche Bank has been present in Russia for 140 years and it's not going anywhere," he added, referring to a period which covers the Russian Revolution, WW2, and the collapse of the Soviet Union, as well as Putin's Ukraine invasion.

"They [Raiffeisen] want to look like they're exiting, by reducing foreign exchange and corporate lending transactions, but they're not really interested in an exit," Barkhota also said.