UniCredit Awaits Court Decision on Russia Business

By Stefania Spezzati

LONDON (Reuters) – UniCredit is still awaiting a court decision on whether it must immediately reduce its Russia business to comply with a European Central Bank (ECB) order, months after filing an objection, sources told Reuters.

The nearly four-month wait for a decision increases pressure on the lender to show compliance with the ECB's requests, whose deadlines have already passed.

The ECB, which is the lender's chief supervisor, instructed UniCredit at the end of April to scale down its business in Russia, including imposing a ban on new deposits and restrictions on handling payments.

In June, the Milan-based bank asked the European Union General Court to annul the demands, which Chief Executive Officer Andrea Orcel has stated could breach Russian laws.

UniCredit has also sought to suspend the measure while court proceedings are ongoing, and in July mentioned that a decision on a suspension was expected "in the coming months".

Representatives for UniCredit, ECB, and the European court declined to comment on this article.

UniCredit has asserted its commitment to significantly reduce its presence in Russia and reiterated its 2025 targets to scale down operations there in July. According to a summary of the ongoing court case, UniCredit requested the judge to annul all of the ECB's demands or, alternatively, the orders concerning loans, deposits, and payments. The ECB has prohibited UniCredit from granting new loans or rolling over existing loans, as well as banning new term deposits since June 1, according to court filings.

UniCredit is contesting the ECB's request to impose restrictions on payments with Russian clients in certain foreign currencies beginning September 1, except for “whitelisted” clients. However, Reuters could not determine which whitelist the ECB is referencing and whether UniCredit has complied with the requests.

In a presentation to investors at the end of July, UniCredit outlined its goal to reduce cross-border payments to below €8.5 billion ($9.3 billion) and local deposits to under €2 billion by 2025.

The Italian lender had approached Abu Dhabi's Mubadala Investment over a year ago to explore a sale of its Russian business, but the $302 billion fund did not pursue it, according to a source familiar with the matter. A spokesperson for UniCredit did not immediately comment, although Bloomberg News previously reported on UniCredit's approach to Mubadala.

"UniCredit is in a difficult position," noted Laura Brank, a partner at law firm Dechert, who has been advising Western firms on the sale of their Russian subsidiaries. "It’s a very delicate balance; the idea of slowly winding down the business is probably the easiest thing to do right now, rather than opting for a quick exit."

RUSSIA TIES

The legal battle with the regulator comes as UniCredit seeks the ECB's approval to increase its stake in Germany's Commerzbank (ETR:CBKG). While the ECB has spoken positively about bank mergers in Europe, the Italian bank is encountering challenges in Germany, according to Reuters.

The ECB assesses purchases of bank stakes based on various criteria, such as the buyer's financial strength and the reputation of the proposed acquirer, including ongoing court proceedings. The regulator will also scrutinize whether the purchase increases the risk of money laundering and financing terrorism, as outlined in the ECB's guidelines.

UniCredit's ties to Russia date back to the International Moscow Bank, the first Russian lender to raise funds from foreign banking institutions. After changes in ownership, it became AO UniCredit Bank and was recognized as a systemically important bank by the Bank of Russia in 2015.

Following the invasion of Ukraine in 2022, UniCredit remained operational in Russia, being one of two European banks—along with Austria's Raiffeisen—to maintain large operations in the country.

($1 = 0.9190 euros)