Citigroup Inc said on Thursday that it will close its consumer and commercial banking operations in Russia beginning this quarter and expects to incur $170 million in charges over the next 18 months as a result.
The largest US bank with a presence in Russia announced plans to exit the retail business in April 2021 as part of a broader exit from some overseas markets. Following Russia’s invasion of Ukraine, it expanded the scope of that exit in March to include local commercial banking but has yet to find a buyer for either business.
According to the bank, the closure will affect approximately 2,300 of Citi’s 3,000 employees in Russia across 15 branches. Citi joins other major Wall Street firms that have closed or announced plans to close operations in Russia in response to Western sanctions.
“This appears to be a good move,” said Siddharth Singhai, chief investment officer at New York-based Ironhold Capital. This is because lending in Russia is risky, and the country may face a severe economic slump as a result of economic sanctions.
Citigroup shares were up 1.3% to $51.68 in early trading.
The bank disclosed $8.4 billion in Russia exposure at the end of the second quarter, down from $9.8 billion at the end of 2021. According to the statement, approximately $1 billion of that exposure is related to consumer and local commercial banking businesses.
Morningstar equities strategist Eric Compton stated that Citi’s exposure is for all outstanding positions related to Russia, as opposed to closing offices and laying off employees.
“The main takeaways are first, additional clarity for the bank as they come to a final ending point for another of the units they have been trying to get rid of, and second, we now know there will be approximately $170 million in costs associated with the wind down,” he said.
“This is a rounding error for a bank with over $50 billion in expenses projected for 2022.”
“Over the past several months, we have explored multiple strategic options to sell these businesses,” Titi Cole, Citi’s chief executive officer of legacy franchises, said in a statement. “Given the many complicating factors in the environment, it’s clear that the wind-down path makes the most sense.”
The exit will have an impact on deposit accounts, investments, loans, and credit cards.
Jane Fraser, who took over as CEO last year, has moved to simplify the Wall Street behemoth, which has been reducing its international footprint by exiting non-core markets, most recently announcing agreements to sell its consumer businesses in Bahrain and India.
Citigroup also stated on Thursday that it will continue to support its multinational institutional clients, particularly those dealing with the difficult task of closing their operations in Russia.
