Russia's biggest lender Sberbank QUITS European market after losing BILLIONS

Russia’s rouble has plunged even further against the pound and dollar today as its biggest lender Sberbank has shut down its European arm after ‘abnormal’ amounts of money started pouring out following the invasion of Ukraine. 

The bank has lost 97% of its value on its London listing in the past fortnight and has told shareholders that significant ‘cash outflows’ have damaged the business outside Russia.

The bank said its subsidiaries in Europe were also facing an ‘a threat to the safety of employees and branches’, according to Russian news agencies. 

Last night the rouble plunged to a record low against the dollar – before rallying slightly this morning before dropping again as sanctions batter the economy. It was  was down around 3.5% on the day versus the dollar today, at 108.6, having weakened to a record low of 117 per dollar yesterday evening.

The Russian stock exchange will not open for the third day running today as Russia’s central bank was forced to sharply hike its key interest rate in a desperate attempt to shore up the plummeting currency market – now at record low levels against the pound and dollar – and prevent the run of banks after being hit by a slew of crippling Western sanctions. 

It came as the world’s largest cryptocurrency exchanges, including Binance and Kraken, said they will not ‘unilaterally’ freeze the accounts of all Russian users despite pleas from the Ukraine government. 

Authorities in Austria and Czech Republic had taken action in recent days against Sberbank’s activities in Europe.

The move was the latest consequence of Russia’s invasion last week, which has led to warfare across Ukraine and unprecedented Western sanctions aimed at isolating Russia’s economy.

This morning it reported record annual net profit for 2021 of 1.25trillion roubles ($12.40 billion), a jump of 64% year-on-year, before unprecedented western sanctions forced the bank to exit the European market.

The bank’s return on equity for the year was 24.2% and its net interest income stood at 1.8 trillion roubles.

Earlier on Wednesday Sberbank said it was leaving the European market as its subsidiaries there face large cash outflows and threats to the safety of employees and property.

The European Union and United States have responded to Russia’s invasion of Ukraine with a battery of sanctions including moving to ban big Russian banks from SWIFT, the main global payments system.

As a result, Sberbank Europe said on Monday that several of its banks had ‘experienced a significant outflow of customer deposits within a very short period of time’.

The SRB ordered the moratorium so that it could determine whether the case should be handled under European bank resolution rules and decided it should not, the FMA said.

The FMA said it had appointed an administrator who is tasked with determining whether and when the criteria of an insolvency are met. In the meantime, the closure triggers Austria’s deposit guarantee scheme, which covers deposits up to 100,000 euros ($111,240) per customer, the FMA said.

Separately, it was announced that two of Sberbank Europe’s units in the Balkans would be taken over.

Croatian Prime Minister Andrej Plenkovic said on Twitter that Hrvatska Postanska Bank would take over Sberbank in Croatia, while Slovenia’s central bank said in a statement that the country’s largest banking group NLB would take on Sberbank’s Slovenian business.

Putin yesterday moved to block foreign companies pulling out of Russia and trap their cash to prop up their imploding war economy after BP and Shell pledged to sell up £15billion ($20bn) of joint ventures following the invasion of Ukraine. 

Prime Minister Mikhail Mishustin announced a presidential order had been signed as Western countries stepped up sanctions, the rouble crashed to an all-time low and Russians queued night and day to pull cash from ATMs amid a run on the banks. 

Mishutin has told a governmental meeting in Moscow that Russia will impose temporary curbs on foreign investors seeking to exit Russian assets to ensure they take a ‘considered decision not one driven by political pressure’. But Mishustin did not provide details about how it would be imposed, as Shell and BP both told MailOnline their plans to sever ties with Russia will continue as planned. 

The Russian PM said: ‘In the current sanction situation foreign entrepreneurs are forced to be guided, not by economic factors, but to make decisions under political pressure. In order to give business a chance to make a considered decision, a presidential order was prepared to impose temporary curbs on exit from Russian assets’.

It came as it was revealed the West is still paying Russia more than $1billion-a-day for oil and gas that Putin can use to subsidise his $15billion-a-day invasion of Ukraine as his troops remain bogged down after hitting fierce resistance from Volodymyr Zelensky’s heroes.   

Shell has said it will ditch its work with Gazprom and pull out of the controversial Nord Stream 2 pipeline as Western powers reel from President Putin’s warmongering in Eastern Europe. Shell is said to have offered £600m of finance for the project.

Shell warned that it could take a £2.2billion hit as it laid out a plan to exit a series of projects. These include its 27.5pc stake in Sakhalin 2 – a flagship facility in the Russian Far East that is majority-owned by Gazprom and produces around 4pc of the world’s liquefied natural gas. 

But it did not announce who they would sell their stakes to. It isn’t quitting Russia altogether, however. It has a network of around 400 petrol stations and a lubricants business in the country which it said it intends to keep. 

Shell’s announcement came a day after BP said that it was cutting ties with Kremlin-backed oil company Rosneft, valued at around £13billion last year. BP is now looking to offload its 19.75pc stake in Rosneft and current boss Bernard Looney has stepped down from the board.

But Putin’s grip on the world’s oil and gas taps means that Europe and the US are still buying almost $1billion-a-day from Russia. The UK also imports smaller amounts from Russia.

However, despite the huge daily cash injection from the West, the Kremlin is facing unprecedented liquidity problems. Its central bank, which raised interest rates to 20% yesterday, is expected to turn to its ally China to try to sell off Chinese assets worth up to $77billion back to Beijing. Britain, the EU and the US will be watching to see just how far President Xi is willing to support Putin and his war.

In a sign the Russian people are paying the price for Vladimir Putin’s invasion of Ukraine, the country’s currency dropped 30 per cent against the US dollar. It has stabilised this morning after hitting rock bottom yesterday.

And after days of turmoil on financial markets, regulators in Russia refused to open the Moscow stock exchange, while long queues formed outside banks as panicked families tried to withdraw cash.

A Moscovite called Anton said: ‘There are no dollars, no roubles – nothing. Well, there are roubles but I am not interested in them. I don’t know what to do next. I am afraid we are turning into North Korea or Iran right now’.

One designer called Andrey told the BBC that rising interests rates mean he can’t pay his mortgage. He said: ‘If I could leave Russia right now, I would. But I can’t quit my job’.

‘I am planning to find new customers abroad asap and move out of Russia with the money I was saving for the first instalment. I am scared here – people have been arrested for speaking against ‘the party line’. I feel ashamed and I didn’t even vote for those in power.’

Russia’s central bank raised interest rates from 9.5 per cent to 20 per cent to counter the violent slump in the rouble and soaring inflation. It also ordered companies to sell 80 per cent of their foreign currency.

Despite the devastating financial damage in just 24 hours, a smirking Vladimir Putin yesterday ranted about the West’s ’empire of lies’ and banned Russians from sending their money abroad from midnight as worldwide sanctions caused the rouble to tumble and sparked a nationwide rush to withdraw cash. 

European stocks sagged and oil jumped back above $100 a barrel on Tuesday as markets struggled with massive uncertainty caused by Russia’s invasion of Ukraine, although the rouble steadied as Moscow scrambled support for its beleaguered markets.

Russia’s stock markets remained suspended and some bond trading platforms were no longer showing prices, but dealing in the major financial centres both in Europe and in Asia overnight was orderly, albeit jittery.

Losses for the pan-European STOXX 600 were starting to mount again, with the index down nearly 2% by midsession and Wall Street expected to open around 1% lower in New York later.

There had initially been gains for mining and oil & gas stocks but even those had soured and there was a heavy 4% slump in bank stocks with investors now sensing that interest rate hikes might now get delayed.

Paul Jackson, Global Head of Asset Allocation Research, Invesco said: ‘Assuming no rapid resolution to this conflict, we fear that global GDP could be reduced by 0.5%-1.0%.’

‘That’s enough to aggravate the ongoing slowdown but not enough to produce recession,’ although he cautioned that some parts of Europe could see a recession and that inflation was also likely to stay higher for longer. 

Russian assets went into freefall on Tuesday with London-listed ishares MSCI Russia ETF falling 50% to hit a fresh record low and Russia’s biggest lender, Sberbank slumping 21% as investors raced for the exit. 

Major money managers, including hedge fund Man Group and British asset manager abrdn, have been cutting their positions in Russia even as the rouble slumped to a record low and trading froze on its bonds.

‘There is certainly a willingness from asset managers and benchmark providers to get rid of Russia exposure in their portfolios and indexes,’ said Kaspar Hense, a senior portfolio manager at Bluebay Asset Management in London. The big question is where do buyers turn up?’