By David Henry and Matt Scuffham
NEW YORK (Reuters) – The sale of Citigroup’s Russian consumer bank could be complicated by U.S. sanctions on Russian state bank VTB, the only publicly confirmed bidder, banking sources said on Thursday.
Although the Russian business is small for Citigroup, it presents an unwelcome headache for the bank’s Chief Executive Jane Fraser as she prepares for an investor day next week which could determine the bank’s future.
Citigroup put the business up for sale last April as part of a broader exit from its international retail operations which it said would take 18 months to complete. VTB board member Dmitry Pyanov said last September that his bank had bid, adding that it was not the only party in the running.
Citigroup declined to comment on the sale. VTB did not respond to requests for comment.
Washington imposed new sanctions after Russian forces invaded Ukraine on Thursday and targeted its two biggest banks, including VTB.
The sanctions throw doubt over whether VTB could be a buyer, according to the banking sources, raising the question of whether Citigroup could attract other bidders.
If not, it could be left having to hold on to the business, request an exemption from the sanctions or write off its value.
Odeon Capital analyst Dick Bove anticipates a write-down, saying Citigroup will struggle to find a buyer.
“Nobody needs it,” he said.
According to regulatory filings, Citigroup had assets worth $5.5 billion in Russia at the end of September 2021, equivalent to 0.3% of its overall assets. That included $700 million in consumer loans.
Although still small, Citigroup has the most exposure to Russia of all major U.S. lenders and is the 19th biggest bank in Russia by assets, according to research published by JPMorgan Chase & Co last month.
“Citigroup could be negatively impacted,” said Bove.
Citigroup declined to respond to Bove’s comments.
Shares in Citigroup led U.S. banks lower Thursday, ending down 4%, having earlier fallen as much as 7%.
(Reporting by David Henry, Matt Scuffham and additional reporting by Megan Davies; Editing by Marguerita Choy)
