UAE’s Soven 1 Holding Acquires Majority Stake in Priorbank

Renowned Austrian lender – Raiffeisen Bank International AG (RBI) – has signed an agreement to sell its 87.74% stake in Belarusian Bank Priorbank JSC and its subsidiaries to the UAE-based Soven 1 Holding Limited.

Priorbank, which began operating in Belarus at the end of 1989, became part of RBI Group in 2003 and is one of the largest banks in Belarus by assets.

In February this year, RBI Group said that the negotiations with Soven 1 Holding Limited to dispose of its Belarusian business were in advance stage to enable a potential exit of RBI from the Belarusian market. The transaction is subject to regulatory approvals and successful closing, which is expected in Q4 of 2024.

This move comes at a significant loss, estimated at around $335 million on RBI Group’s consolidated profit, resulting mainly from the difference between purchase price and book value of Priorbank. By offloading this business, RBI Group, which boasted $2.23 billion in deposits.

However, the deal will have no impact on the regulatory capital and capital ratios of RBI Group and is related to the reclassification of predominantly historical FX losses currently recognized in other comprehensive income.

At closing, the impact on RBI Group’s CET1 ratio excluding Russia is expected around -5 basis points, resulting from the estimated difference between purchase price and book value of the equity and from the deconsolidation of the RWAs of Priorbank JSC.

With significant industrial holdings, over 18 million clients, and 44,000 employees stretching from Vienna to Moscow, RBI is a financial hub for Austria and much of Eastern Europe.

Russia has remained a major profit source for the bank since the Ukraine conflict began in 2022, contributing nearly half of its group profits in the first three months of this year due to surging taxes on the foreign payments.

According to a report published by finrate.com, RBI’s decision to divest in Belarus is indicative of the mounting pressure to also reduce its presence in Russia. Despite earlier promises to spin off its Russian business, which has acted as a critical payment lifeline for numerous companies, little progress has been made since the onset of the Ukraine conflict more than two years ago.

International regulators have intensified scrutiny of RBI, pressuring the bank to re-evaluate its role in Russia and curb its operations.

Lifeline for Russians

Despite its current divestments, RBI remains a vital financial conduit for millions of Russian customers seeking to transfer euros or dollars abroad. However, the bank has recently restricted these services in response to escalating international pressure.

The European Central Bank, along with other Western regulators, is advocating for a significant reduction in RBI’s Russian footprint, viewing it as crucial for severing financial ties between Russia and the West.

RBI’s situation contrasts sharply with banks like Italy’s UniCredit, which also operates in Russia. However, RBI’s larger scale and strategic importance position it as a key player in the debate about Western financial ties to Russia. With approximately 2,600 corporate clients and 4 million local account holders, the bank significantly facilitates international payments, the report added.