SocGen Sells Rosbank Back to Potanin’s Interros, Takes $3.4 Billlion Hit
2022.04.11 12:55
By Geoffrey Smith
Investing.com — Societe Generale (PA:SOGN) stock rose sharply by mid-morning on Monday as the French bank said it will sell its Russian subsidiary Rosbank (MCX:ROSB) back to its former owners, the latest in a string of moves by western institutions turning their back on the Russian market in response to Russia’s invasion of Ukraine.
The French bank said it will take a total of 3.1 billion euros ($3.4 billion) in charges from writedowns of both Rosbank and its insurance operations in Russia, which it is also selling back to Interros, the holding company controlled by metals magnate Vladimir Potanin. The bank made no mention of a purchase price, except in so far as Interros will repay some $500 million of subordinated debt issued by SocGen to its subsidiary.
The move had been expected and the market was reassured by SocGen’s assurances that the accompanying writedowns would have only a modest impact on its overall financial health. The bank’s core tier 1 equity ratio, a measure of financial strength, will fall by only 20 basis points as a result of the disposal. At the end of last year, that capital ratio had stood at 13.7% – some 470 basis points above the regulatory minimum.
The move ends what had been an increasingly profitable venture for SocGen. Rosbank had contributed 152 million euros in net income to the group’s bottom line in 2021, more than double what it earned in the first year of the pandemic.
The stock’s reaction made SocGen the best performing stock in Paris on a morning when the overall market breathed a sigh of relief at incumbent Emmanuel Macron’s narrow win in the first of two rounds of voting in the country’s presidential elections. Macron will now progress to a run-off with populist right-wing leader Marine Le Pen in two weeks’ time.
