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Deutsche Bank Won’t Exit From Russia: ‘Not Practical’

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On Thursday, German firm Deutsche Bank defended its decision to remain open for business in Russia. The bank said that at present, it’s “not practical” to close its operations in Russia.

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Deutsche Bank Won’t Close Operations in Russia

A flag flies outside the Deutsche Bank headquarters | Deutsche Bank Won’t Close Operations in Russia

Even as more and more companies are closing shop in Russia, Deutsche Bank remains steadfast in its decision. James von Moltke, the bank’s CFO, defended the company’s stance. He said that Deutsche Bank will fulfill its duty to care for clients still operating in the country. 

Deutsche Bank’s decision comes across the grain as many other major banks are beginning to pull out of Moscow.

Goldman Sachs initiated the Wall Street exodus, announcing last Thursday that it will wind down its business in Russia. HSBC also informed staff to conclude all their pending business with Russian banks. 

Deutsche Bank Put Clients Ahead Of Russia-Ukraine War Concerns

For Deutsche Bank, it’s still business as usual. Von Moltke insists their international clients need support more than ever. “We’re there to support our clients. And so, for practical purposes, that isn’t an option that’s available to us, he said.

He added that staying is the only way to manage client relationships and help them in their situation. 

However, the bank will reconsider its position should the political situation escalate further. It will also reconsider when its mostly multinational clients stop operating in the country.

“Of course, we’ll need to look at how this situation evolves and consider our footprint in Russia,” he added. 

Von Moltke also said that travel conditions will also play a role in their decision. As client presence diminishes, “so too will our presence in Moscow.”

Major Western Companies Pulling Out Of Russia Due to Invasion

Deutsche Bank’s decision to remain operational in Russia comes as a surprise to many. Other major corporations have either closed or paused their operations in the country.

Western economic sanctions include placing restrictions on bank transactions and cutting off Moscow from international banking systems. This makes it hard for companies and banks to transact with local Russian companies. 

At the same time, major corporations are pulling out of Russia, despite Moscow’s threats to seize assets left behind. Pepsi, Coca-Cola, McDonald’s, Burger King, and Starbucks are among multinationals that are forsaking revenues in the country. 

Banks Having A Hard Time Operating Under Sanctions

The sanctions against local banks and businesses are making it difficult for companies to operate within Russia.

However, Deutsche Bank insists that their exposure to Russia remains very limited. Russian loans only amounted to 0.3% of its total loan book. This is roughly equivalent to 1.4 billion euros. 

In the war’s early days, Von Moltke said the bank weathered the market risk “quite successfully”. He added that the bank’s Moscow capitalization is fully hedged to manage currency risks.

“The market will always react to a crisis and the scenarios that unfold and look at the downside scenarios first. I think then, over time, we’re able to provide more information, we’re able to talk about our trajectory,” he said.

Deutsche Bank Burned in Russia Before

Historically, Deutsche Bank enjoys a mixed record in the country. In 2015, it pulled out of its Moscow operations after accusations of money laundering by Russian clients surfaced.

Two years later, Deutsche Bank entered into a settlement with US and UK authorities over mirror trades. This moved $10 billion of Russian client money out of the country. 

Watch the Bloomberg Markets & Finance video featuring Deutsche Bank CFO talking about on Russia, markets, and growth strategy:

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