UniCredit flags risk ECB may take further steps on Russia

By Valentina Za

MILAN (Reuters) - The European Central Bank may take further steps if it judges UniCredit has not adequately complied with demands to reduce its business in Russia, the Italian bank said in an investor document as it listed potential risks.

UniCredit, Italy's second-largest bank, said on Wednesday it would launch its 14 billion euro ($15 billion) tender offer to acquire Banco BPM on April 28, having received the all-clear from market regulator Consob.

In documents for investors published on its website, UniCredit described risks connected to Russia where it owns a retail bank.

UniCredit said that a complete loss of its Russian unit would have more than halved its 2024 profit, reducing it to 4.2 billion euros from 9.7 billion euros.

However, the bank said the hit to its core capital ratio - a key gauge of financial strength - would be at most half a percentage point, despite a carrying value of 5.5 billion euros for its net assets in Russia, partly because their loss would free up capital.

"(UniCredit's) presence in Russia exposes it to the specific risks connected to the ongoing Ukrainian crisis. These risks are also recognized by the ECB," it said.

The ECB last April set deadlines for UniCredit to speed up its exit from Russia, which the Italian bank has challenged at the European Union's General Court.

UniCredit has said meeting the ECB's requests could prompt it to break Russian law or international sanctions.

CEO Andrea Orcel told shareholders last week that UniCredit was in compliance with ECB demands over Russia.

"UniCredit – in compliance with the ECB's decision – is acting to reduce such risks," the bank said in the document. "Should the ECB assess that UniCredit actions are not complying with its decision, the ECB could take additional supervisory measures."

Orcel, who in early 2022 was considering buying another Russian bank as tensions over Ukraine mounted, has said he wants to minimise costs for shareholders in reducing the lender's Russian business.

Payments pose the biggest issue, a person with knowledge of the matter has previously told Reuters, as the few non-Russian banks still in Russia are the only ones that can process cross-border payments.

UniCredit said in its full-year results that cross-border payments it handled with Russia rose 8% in the fourth quarter to 9.8 billion euros, due to one-off debt repayments from Western companies.

($1 = 0.9244 euros)

(Reporting by Valentina Za; Editing by Mark Potter)