By Mauro Orru 
 

Intesa Sanpaolo, Italy's largest bank by assets, is closing its representative office in Moscow, a spokesman said Wednesday, building on efforts to reduce the group's exposure to Russia after its invasion of Ukraine.

Intesa's presence in Russia dates back 48 years. The group's Moscow-based corporate bank has been operating 27 branches with 907 staff as part of a regional branch network stretching from the Russian exclave of Kaliningrad in Eastern Europe to Vladivostok in the Far East, according to the bank's 2022 report.

Since the war broke out, Intesa has been working to gradually reduce its exposure to Russia, bringing it down to 700 million euros ($768.8 million), or 0.2% of the group's total customer loans at the end of June, from EUR3.2 billion in June 2022. However, Intesa still has a very small local subsidiary in Russia, the spokesman said.

Numerous Western companies have left Russia since the invasion of Ukraine, though some remain. Austria's Raiffeisen Bank International--one of the European banks with the largest exposure to Russia, with more than 9,500 employees there at the end of 2022--has been looking at ways to dispose of its Russian operations. It reduced loans to customers and ring-fenced Raiffeisenbank Russia's capital, but it never left the country.

Recent developments in Russia are making it harder for Western companies to leave. Last month, Russia appointed Chechnya's agriculture minister as the new head of Danone's business in the country and tapped a Russian businessman to run Carlsberg's operations there, cementing control of the Western multinationals' Russian assets days after they were seized.

The moves highlight the risks to Western companies that still operate in Russia, or are looking to leave, as well as the shifts in corporate power in the country more than a year after the invasion of Ukraine.

Russia issued a decree in April that allows the state to take temporary control of assets of companies or individuals from what the Kremlin calls "unfriendly" states.

Last year, the Kremlin adopted rules requiring the Russian government to conduct an assessment of the market value of any asset for sale by a foreign company. The seller is then required to sell the asset at a 50% discount of that value. Additionally, Moscow is levying an exit tax of 10% of the transaction price.

 

Write to Mauro Orru at mauro.orru@wsj.com; @MauroOrru94

 

(END) Dow Jones Newswires

August 02, 2023 09:10 ET (13:10 GMT)

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