Sberbank European assets on brink of collapse as sanctions bite

Sberbank European subsidiaries are on the brink of collapse warns the European Central Bank as Russia’s largest bank face failure because of the impact of sanctions.

Shares fell heavily at those lenders with the most exposure to the country with the ECB warning the European arms of Sberbank are already failing or likely to fail under the weight of western sanctions and after “significant deposit outflows”.

The assessment “follows a rapid and significant deterioration of the liquidity situation” at Sberbank Europe in Austria and its subsidiaries in Croatia and Slovenia, the Single Resolution Board announced on Monday.

The SRB, which handles the resolution of failing banks in the EU, said it had suspended payments, enforcement and termination rights – meaning that most payment or delivery obligations stemming from any contract with one of Sberbank’s EU subsidiaries were temporarily suspended.

“Depositors will be able to withdraw a daily allowance amount, determined by the respective national resolution authorities,” it said, adding that deposits of up to €100,000 would be protected at the bank.

The deposit guarantee is for clients of each subsidiary separately. Sberbank’s Austria-based subsidiary had €13.6 billion of assets at the end of last year. Sberbank Europe has about 800,000 retail and corporate customers in central and eastern Europe, with total assets of €13 billion.

The Russian bank established its European subsidiary when it acquired Austria-controlled Volksbank International in 2012.

Sberbank Direct, its online banking operation, has been offering German depositors interest rates of up 1.5 per cent on their savings — much higher than the near-zero rates offered by most domestic lenders.

Shares fall

Shares at European banks with the biggest exposure to Russia fell sharply, with Raiffeisen, the Austrian bank that generates close to a third of its profits from the country, falling 18%.

Raiffeisen’s shares have fallen more than 50% over the past three weeks, with Monday’s drop in response to western sanctions that sent the rouble tumbling 29% and led to Russia’s central bank raising its main interest rate from 9.5% to 20%.

The Austrian lender is one of the three western banks with the biggest operations in Russia, including Italy’s UniCredit and France’s Société Générale.

The three banks’ Russian subsidiaries have not been included in the western sanctions lists, which have focused on domestic players, and they have not been removed from the Swift global payments messaging system.

Sberbank shares have fallen more than 50% over the past three weeks as tension on the Ukrainian border escalated into a full Russian invasion.

Sberbank was barred from making US dollar transactions last week, while VTB Bank, Russia’s second-biggest lender, had its assets frozen. They are expected to be taken off Swift.

Sberbank and VTB account for more than half of Russia’s banking assets.

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