Deutsche Bank says not ‘practical’ to exit Russia business

Deutsche Bank said Thursday it is not “practical” to close its Russia business, despite similar moves by major corporations seeking to distance themselves from the country over its invasion of Ukraine.

Speaking to CNBC, the German bank’s chief financial officer defended the decision, saying it hinged on its duty of care to clients that still operate in the country.

It comes as other major banks make moves to pull out of Russia. In Wall Street’s first departure, Goldman Sachs said Thursday that it was winding down its business in the country, while HSBC on Monday told staff to begin ceasing their dealings with Russian banks.

“We’re there to support our clients. And so, for practical purposes, that isn’t an option that’s available to us. Nor would it be the right thing to do in terms of managing those client relationships and helping them to manage their situation,” James von Moltke said.

Von Moltke added that the bank would be willing to reconsider its position should the political situation escalate further and its clients in Russia — mostly multinationals — cease their operations in the country.

“Of course, we’ll need to look at how this situation evolves and consider our footprint in Russia as we gain some greater clarity as to the direction of travel here,” he said.

“As that [client presence] diminishes, so too will our presence in Moscow.”

Von Moltke did not name any of the bank’s clients in Russia.

CFO of Deutsche Bank James von Moltke speaks to the media during the bank’s annual press conference to discuss financial results for 2019 on January 30, 2020 in Frankfurt, Germany.

Thomas Lohnes | Getty Images News | Getty Images

It comes as the list of Western companies closing or pausing their Russian operations grows.

PepsiCo, Coca-Cola, McDonald’s and Starbucks all said on Tuesday that they would suspend business in the country, joining a league of brands that have exited the country following Russia President Vladimir Putin’s invasion of Ukraine.

Sanctions on a number of Russian banks and other businesses, meanwhile, have made it harder for companies to operate within the pariah state.

Russian exposure ‘very limited’

Shares of European banks have gyrated dramatically since Russia’s invasion, with markets seeking to quantify their exposure to the conflict and resulting Western sanctions.

Deutsche Bank, for its part, has sought to reassure investors that its exposure to Russia is “very limited.”

In an announcement released Wednesday, the bank said that included gross loan exposure to Russia of $1.4 billion euros ($1.55 billion), or 0.3% of its total loan book.

Von Moltke said the bank had managed the market risk “quite successfully” in the war’s early days, and noted that it was working closely with clients to manage their response.

He added that the bank’s capital in its Moscow subsidiary had been “fully hedged” to manage currency risks.

“The market will always react to a crisis and the scenarios that unfold and look at the downside scenarios first. I think then, over time, we’re able to provide more information, we’re able to talk about our trajectory,” he said.

Deutsche Bank has been burned in Russia previously. In 2015, it pulled back its investment banking business in the country following an investigation into potential money laundering by Russian clients.

Later, in 2017, it entered settlements in the UK and the US over so-called mirror trades, which saw the bank move $10 billion of Russian client money out of the country.

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