Raiffeisen Bank International shares under pressure after allegations from Grizzly Research

Vienna. Serious allegations from a short seller have hit the shares of Raiffeisen Bank International (RBI), which is under pressure because of its Russian business. The Austrian bank's shares fell over eight percent on Thursday. In a report, short seller Grizzly Research accuses RBI of misconduct in connection with its Russian subsidiary bank.

In response to a request from the Reuters news agency, the RBI said it was convinced of the strength of its compliance systems, which have been reviewed many times. “In addition, after an initial review, we see a number of factually incorrect and misleading statements,” it said in a statement.

The bank initially did not comment on the allegations in detail. The Russian subsidiary in Moscow declined to comment. Reuters was not immediately able to verify the information provided in the report.

Grizzly Research is a short seller who bets on falling prices. In the past, the US company had already caused a stir and sometimes violent share price reactions with critical reports on the German prosthesis manufacturer Ottobock and the Italian tire manufacturer Pirelli. The authors of the new report are now calling on the Austrian Financial Market Authority (FMA), the European Central Bank (ECB) and the US Treasury Department to initiate an investigation in connection with the RBI.

The allegations hit a sore spot for the institute. RBI is the largest Western bank that is still active in Russia even after the Russian attack on Ukraine and plays an important role in payment transactions there. The institute has long been under pressure from regulators and investors to withdraw from Russia. At the beginning of 2023, a request for information from the US sanctions authority OFAC about the bank's Russian business had already fueled concerns about drastic penalties.

The bank, which operates in Eastern Europe, has now significantly scaled back its business in Russia under pressure from regulators and reduced the loan volume to 2.5 billion euros. The institute recently had 2.8 million customers and 63 branches there. Nevertheless, on paper, the Russian business contributed 550 million euros to the consolidated result in the first half of the year. However, these profits cannot be distributed to Vienna due to Russian capital controls.

In its latest presentation, the RBI said that winding down the business remains the base case but that sales efforts will be renewed. However, an exit is proving difficult because it requires numerous approvals, including from the Kremlin. Russian authorities also want to preserve an important bridge for money transfers with the West.

In a negative scenario, the RBI itself expects a total loss of 6.5 billion euros of equity tied up in Russia. At the same time, the bank is trying to secure assets. At the end of July, she filed a lawsuit in Vienna for 3.15 billion euros in order to access frozen Austrian assets - shares in the construction group Strabag.