"Leaving Is Not An Option" - Deutsche Bank CFO Defends Decision To Remain In Russia

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by Tyler Durden
Friday, Mar 11, 2022 - 10:45 AM

At this point, dozens, if not hundreds, of western multinationals have abandoned their business in Russia, some of them have walked away from assets worth billions of dollars.

Just the other day, McDonald's and Coca-Cola "temporarily" abandoned their own businesses in Russia (for the duration of the war). Starbucks and Pepsi have made similar moves. But amid reports about their heavy IT reliance on St. Petersburg (not to mention the German economy's massive dependence on Germany natural gas and oil), German banking giant Deutsche Bank has decided to defend its decision to continue operating in Russia during the war.

Speaking during a Thursday interview, DB CFO James von Moltke defended the bank's decision to stay, saying it hinged on its duty of care to clients that still operates in the country.

The decision comes as other major banks make moves to pull out of Russia, notably Goldman Sachs said Thursday that it was winding down its business in the country, while HSBC on Monday told employees to cease their dealings with Russian banks.

Von Moltke explained that the bank is "there to support our clients" and therefore, the decision to pull out "isn't one that's available to us".

"We’re there to support our clients. And so, for practical purposes, that isn’t an option that’s available to us. Nor would it be the right thing to do in terms of managing those client relationships and helping them to manage their situation," James von Moltke said.

Von Moltke added that the bank would be willing to reconsider its position should the political situation escalate further and its clients in Russia - mostly multinationals - cease their operations in the country.

Of course, we’ll need to look at how this situation evolves and consider our footprint in Russia as we gain some greater clarity as to the direction of travel here,” he said.

"As that [client presence] diminishes, so too will our presence in Moscow."

Deutsche Bank has reassured investors that its exposure to Russia is "very limited".

Of course, that's not exactly true. The bank helps finance the all-important energy and gas trade between the two countries, and on Wednesday alone, the bank said it had raised loan exposure to Russia to $1.55 billion. That's only 0.3% of its total book, In an announcement released Wednesday, the bank said that included gross loan exposure to Russia of $1.4 billion euros ($1.55 billion), or 0.3% of its total loan book. Von Moltke said the bank had managed the market risk “quite successfully” in the war’s early days, and noted that it was working closely with clients to manage their response. But it's the second and third order impacts that are harder to judge, as he told Bloomberg.

As for the IT issues that we reported on a few days ago, von Moltke dismissed them as a non issue during an interview with Bloomberg.

But whatever is happening in Russia, Deutsche Bank claims it has an obligation to be there for its clients.

Both of the bank's subsidiaries in Russia and Ukraine have continued to operate "which is remarkable," the CFO said.

"We have capital in our Moscow subsidiary and that capital has been fully hedged."

As for leaving the Russian market altogether, the bank will need to wait and see how the diplomatic talks between Moscow and Kiev take place. And there's always those "supply chain" complications that Volkswagen CEO warned earlier could create problems for Europe that would be "worse than COVID".