Summary:
Despite many Western companies exiting Russia due to the ongoing Ukraine war and the increasing sanctions, Austria’s Raiffeisen Bank, the largest Western bank still operating in Russia, has boosted staff pay at its Russian subsidiary. The bank’s staff costs increased by €199 million ($219 million) for the first half of 2023, resulting in an average payout of about €22,000 ($24,000) per employee in Russia. This increase is attributed to higher salaries, social security costs, provisions for one-off payments, and an increase in headcount. Raiffeisen Bank reported a 9% rise in profits after tax at its Russian business for the first six months of the year. Despite its profitability, the bank is under pressure to exit the Russian market and is exploring options for a sale or spin-off of its Russian business by the end of 2023.
Analysis:
- Raiffeisen Bank, the largest Western bank still operating in Russia, has decided to increase staff pay at its Russian subsidiary, despite the challenging market conditions and pressure to exit the country.
- The staff costs for Raiffeisen Bank’s Russian subsidiary rose by €199 million ($219 million) for the first half of 2023. This increase is primarily due to higher salaries, social security costs, provisions for one-off payments, and an increase in headcount.
- The bank’s decision to boost staff pay reflects its commitment to retaining and incentivizing its employees during a period of uncertainty and potential business restructuring.
- With nearly 10,000 staff in Russia, the average payout per employee amounts to about €22,000 ($24,000).
- Despite increasing staff costs, Raiffeisen Bank’s Russian business remains profitable. It reported a 9% rise in profits after tax for the first six months of the year, reaching €685 million ($753 million).
- However, the overall profitability of Raiffeisen Bank Group, which includes its operations in various countries, dropped by 24% during the same period.
- Raiffeisen Bank’s decision to exit the Russian market is driven by the ongoing Ukraine war and the increasing sanctions imposed on Russia by Western countries.
- The bank aims to finalize plans for a sale or spin-off of its Russian business by the end of 2023, but the process is complex due to the changing legal and regulatory landscape in Russia.
- Exiting Russia is becoming more challenging for Western companies as the Kremlin has made it punitive for businesses to leave the country.
- Despite the complexities, Raiffeisen Bank is actively reducing its operations in Russia while exploring options for a potential exit.
Viewpoint:
Raiffeisen Bank’s decision to increase staff pay at its Russian subsidiary amidst mounting pressure to exit the market reflects a strategic move to retain its workforce and maintain business continuity. By providing higher salaries and incentives, the bank aims to motivate its employees and acknowledge their contributions during a period of significant uncertainty and potential restructuring.
While many Western companies have chosen to exit Russia due to geopolitical tensions and economic sanctions, Raiffeisen Bank seems to be taking a different approach. Despite expressing its intention to spin off or sell its Russian business, the bank is still investing in its employees and ensuring profitability in the country.
The increase in staff costs demonstrates Raiffeisen Bank’s commitment to its workforce and the importance of retaining skilled professionals in its Russian operations. In a challenging market environment, retaining talent can be crucial for sustaining business operations and successfully navigating any potential restructuring in the future.
Rather than completely withdrawing from Russia, Raiffeisen Bank’s strategy seems to be a balance between reducing operations and preparing for a potential exit. This approach allows the bank to leverage its existing presence in the country while exploring options for a smooth transition out of the Russian market.
Overall, Raiffeisen Bank’s decision to increase staff pay sends a positive message to its employees, indicating the bank’s commitment to their well-being and incentivizing them to continue delivering excellent performance amidst challenging circumstances. This move sets an example for other companies operating in Russia, highlighting the significance of valuing and investing in human capital even during periods of uncertainty.
- Raiffeisen Bank increased staff pay at its Russian subsidiary by €199 million ($219 million) for the first half of 2023.
- This increase is a result of higher salaries, social security costs, provisions for one-off payments, and an increase in headcount.
- The average payout per employee in Russia amounts to about €22,000 ($24,000).
- Despite the ongoing Ukraine war and increasing sanctions, Raiffeisen Bank remains profitable in Russia with a 9% rise in profits after tax for the first six months of the year.
- Raiffeisen Bank is under pressure to exit the Russian market and is exploring options for a sale or spin-off of its Russian business by the end of 2023.
- Exiting Russia is challenging due to changing laws and regulations, as well as punitive measures imposed by the Kremlin.
- Despite the potential exit, Raiffeisen Bank continues to invest in its employees, reflecting its commitment to retaining skilled professionals and maintaining business continuity.