UniCredit boss Says Giving Away Russian Unit Would Be Morally Wrong

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Andrea Orcel, the chief executive of UniCredit, told an audience in Milan that giving away the Russian bank’s unit would be morally wrong. The bank has been studying exit strategies since February, when Russia invaded Ukraine. The escalating Western sanctions have complicated the process. The bank has also expanded its search to other countries, including China and India. UniCredit declined to name the potential investors.

Currently, UniCredit has 4,000 employees in Russia and covers about 1,500 companies. As of June 14, more than a thousand of its employees are trying to leave Russia, and the bank faces a loss of EUR7 billion if it loses its Russian business. But Orcel says there is still no final decision and the bank is evaluating all options.

Some Western firms have had trouble exiting Russia. Burger King, for example, stopped corporate support to its Russian outlets in March. The company now has about 800 restaurants in Russia. Lawyers say the problem is that Burger King has a joint venture style franchise agreement, while UniCredit has successfully disposed of assets by swapping and looking for potential buyers abroad. However, the Russian government is preparing a new law to seize control of Western companies’ local businesses.

In the meantime, the new owners will have limited access to Western goods. The cost of everything is soaring, and the economy has sank into recession. But this exodus is creating a windfall for firms outside of sanctions. Interestingly, no bankers have joined the exodus. Normally, banks would be key players in these deals. But due to the sanctions, they are staying away from such deals.

Other foreign companies have struggled to exit Russia. Renault sold a joint venture to the Russian state, and McDonald’s sold 800 branches to a Siberian businessman. Both companies reportedly have buyback clauses. Other companies have sold their Russian units to local managers and booked large writedowns of tens of billions of dollars. Ladau, who owns a majority of Paulig coffee, has been a pioneer in getting out of the country.

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