Sberbank said that it is facing a major liquidity crunch to supply to its European subsidiaries. However, it assured that the capital and assets are enough to pay all depositors.
Sberbank, the largest lender in Russia has decided to quit the European market, days after heavy sanctions from the West. The bank blames heavy cash outflows and the threat to its staff as well as property following Russia’s invasion of Ukraine.
Sberbank Quitting European Market
The move seemed rather inevitable just as the European Central Bank (ECB) announced the closure of the bank’s European arm. The ECB also warned that the bank faced major losses as deposits turn dry following the Russian invasion.
The Russian economy comes under major pressure following heavy monetary policies imposed by the West. Sberbank said that it is no longer able to supply liquidity to its European subsidiaries after the order from the Bank of Russia which is seeking to preserve foreign currency.
However, it assured that the capital and assets are sufficient to pay all depositors. In its official statement, Russia’s largest lender stated:
“In the current situation, Sberbank has decided to leave the European market. The group’s subsidiary banks have faced abnormal cash outflows and threats to the safety of its employees and branches.”
Sberbank had recently registered record annual profits for 2021. Sberbank said that its net profit for the last year of 2021 jumped 64% to 1.25 trillion rubles. The ROE for the last year was 24.2% and the net interest income stood at 1.8 trillion rubles.
The exit from the European market, however, doesn’t affect Sberbank’s business in Switzerland. It continues to operate as usual here it said.
Dealing with SWIFT Sanctions
The Russian government has been facing severe pressure from the West amid heavy financial sanctions. The West has decided to isolate Russia by choking Russia’s central bank access to the SWIFT system, the most widely used digital transaction system globally.
Russian central bank governor Elvira Nabiullina said that they are facing challenges. However, on Monday, she added that Russia is preparing for an alternative to SWIFT. She further added:
“We have a financial messaging system – SPFS, which can replace SWIFT domestically. Participants from abroad can join it”.
Sberbank CEO CEO German Gref who has been quiet since the crisis unfolded said that the focus was on “the new challenges that the Russian economy and the financial sector is facing”. Sberbank’s depositary receipts in London have tanked by a staggering 90%.