UniCredit has pulled out of a potential bid for Russian lender Otkritie due to escalating tensions over Ukraine, capping a week of mounting scrutiny over European business ties to Moscow and the threat of sanctions.
The Italian lender had shown interest in Otkritie, one of Russia’s largest state-run lenders, as chief executive Andrea Orcel seeks to boost its profitability.
“Given the geopolitical environment we decided to withdraw from the data room,” Orcel said in a media call on Friday.
Earlier this week Orcel took part in a call between Italian business executives and Russian president Vladimir Putin to discuss opportunities for Italian companies in Russia.
UniCredit is among the European banks with significant exposure to Russia and the European Central Bank has told them to get ready for international sanctions on the country if Moscow invades Ukraine.
Russia’s central bank is planning to list Otkritie, which was nationalised in 2017, in an initial public offering. UniCredit’s interest in the Russian bank was reported by Bloomberg this month.
The US has said that Russia would face “massive consequences” if it sent troops into Ukraine. Sanctions would increase the risk for banks, such as UniCredit, with large Russian exposure.
UniCredit on Friday used its earnings statement to warn of the economic risk of conflict in Ukraine.
“The negative economic impact is expected to mainly come from a potential energy shock, especially for countries more vulnerable such as Germany, possible tensions in financial markets and, to a lesser extent, through the trade channel,” the bank said.
UniCredit’s underlying full-year net profits, excluding some costs, rose to €3.9bn, beating its own guidance of €3.7bn, the lender reported on Friday. Revenue also outstripped forecasts, increasing 4.8 per cent compared with the previous year to €18bn.
The second-largest Italian lender in December unveiled a plan to increase profits by a tenth every year for the next three, driven by growth in fee income. That would generate more than €4.5bn annually. UniCredit also plans to distribute more than €16bn to shareholders by 2024.
It added that it did not expect the European Central Bank to raise interest rates until 2024.
The increase in UniCredit’s full-year earnings came despite a quarterly loss of €1.4bn, which was due to restructuring charges and costs related to the disposal of non-core assets.
The bank reported earnings per share of €1.58, and proposed a cash dividend of just under €1.2bn and share buybacks totalling about €2.6bn.
Income from fees rose 1.8 per cent in the final quarter compared with the previous three months and were up 11.7 per cent on the same period a year ago. Net interest income rose 6 per cent quarter on quarter to €2.4bn.