HSBC completes transfer of Russian unit to Expobank amid ongoing sanctions

HSBC finalised the transfer of ownership of its Russian unit to Expobank for an undisclosed price, the two banks announced on Wednesday, ending nearly two years of discussions and uncertainty.

HSBC's exit from the Russian market has been anticipated since February when Russian President Vladimir Putin approved the asset sale to privately owned Expobank. The transaction signals the end of HSBC's participation in Russia, which was first announced in June 2022 when the bank agreed to sell a 100 per cent interest in HSBC Bank (RR) LLC to Expobank.

"Economic ownership of HSBC Russia has been transferred to Expobank," HSBC announced in a statement. "The transaction will formally complete once the legal title transfer has been registered in the State Corporate Register."

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Expobank announced the successful transaction, stressing that the unit will continue to function under a new, yet-to-be-disclosed name.

Despite persistent sanctions, European banks have been under increased pressure from Washington and the European Central Bank to divest from Russia. Foreign banks face a particularly difficult regulatory landscape following a 2022 decree prohibiting investors from "unfriendly" countries—those imposing sanctions on Russia for its actions in Ukraine—from selling shares in key energy projects and banks without presidential approval.

Raiffeisen Bank International from Austria remains Russia's largest European lender, followed by UniCredit from Italy. Another big Italian bank, Intesa Sanpaolo, has been preparing to quit the Russian market and has gotten Putin's approval in September 2023. However, the transaction has been delayed due to bureaucratic roadblocks, according to the bank's CEO.

In September 2023, HSBC, Europe's largest bank, stated that it would stop making commercial payments to and from Russia and Belarus, citing the growing difficulty of operating under the sanctions system. Before the conflict in Ukraine, HSBC's Russian unit generated about $15 million in revenue, which was a small portion of the bank's total revenue of more than $50 billion. The plant employed approximately 200 individuals at the time.

The US sanctioned Expobank in December as part of a broader package of penalties aimed at Moscow's energy and banking sectors in response to Russia's military activities in Ukraine in February 2022.

As HSBC closes its business in Russia, the bank has drastically decreased the size of its Russian unit, under its overall goal to comply with international sanctions and regulations.

(With inputs from Reuters)