Société Générale/Rosbank: selling out to an oligarch of last resort

In the land of the sanctioned, the unsanctioned oligarch is laughing all the way to the bank. Amid a range of financial curbs on Russians for the heinous invasion of Ukraine, only Canada has so far targeted Vladimir Potanin. That allows the billionaire to negotiate the purchase of Société Générale’s wholly-owned Russian subsidiary Rosbank at a bargain price.

For European banks with Russian operations, disengagement is more a case of getting out when they can rather than when they feel like it. SocGen is grasping the nettle. UniCredit of Italy and Austria’s Raiffeisen should do the same. Sanctions will only widen, further limiting the buyer pool.

Potanin’s industrial and political assets may be entwined. The US and EU must be reluctant to sanction the owner of a controlling stake in Norilsk Nickel. The company produces more than 7 per cent of the world’s nickel and 40 per cent of its palladium, according to S&P Global. Nickel is widely used in batteries while palladium features in catalytic converters.

Interros Capital, a Potanin vehicle, plans to buy Rosbank along with any insurance subsidiaries. The deal should close in weeks. It appears the amount paid will only cover intergroup funding between Rosbank and its French parent, about €500mn, says Berenberg’s Andrew Lowe.

The bank will write off about €3.1bn. This would reduce SocGen’s common equity tier one capital ratio of 13.7 per cent by a modest 20 basis points. SocGen’s share price jumped more than 6 per cent on Monday.

The sale represents a solution for long-serving SocGen boss Frédéric Oudéa, assuming the US and EU do not follow Canada’s lead. Oudéa would have had a hand in buying control of Rosbank — from another Potanin investment vehicle — for $1.7bn back in 2008.

The Russian net exposure of Raiffeisen sits at more than a quarter of its tangible net asset value — double UniCredit’s and triple that of SocGen. That is if you believe in historic values, which no one does. The Italian lender last week said there could be no quick sale.

It is easy to condemn western banks that invested in Russia. But it had a promising economy, roughly a tenth the size of the EU, that was apparently opening up. Investors could claim to be spreading free-market, freethinking western ways. Their retreat reflects the failure of that mission.

The Lex team is interested in hearing more from readers. Please tell us what you think of the Rosbank sale in the comments section below.