UniCredit, in a new trial in Russia

UniCredit SpA is facing a second dispute in Russia, related to the payment of guarantees that the Italian banking group could not honor due to Western sanctions imposed on Moscow after the invasion of Ukraine, according to the half-yearly report published by the financial institution, cited by Reuters.

UniCredit controls Russia's 15th largest bank by assets and is involved in another court action over the payment of guarantees that its local subsidiary could not honor following sanctions.

The Italian bank faces pressure from the European Central Bank (ECB) to speed up the reduction of its exposure to Russia, but on July 1, UniCredit asked the Court of Justice of the European Union to review the legality of certain elements of an ECB decision that forces it to reduce its presence in Russia. UniCredit believes that complying with the ECB decision could make the Italian group violate Russian laws, according to Reuters.

On June 26, a court in Saint Petersburg ordered UniCredit to pay 448 million euros, given that the Italian group was one of the guarantors in the contract for the construction of a gas processing facility, a contract that was terminated in following western sanctions. The construction was done with the German group Linde.

In addition, UniCredit's semi-annual report said its Russian subsidiary, AO Bank, sued the group's German division, UCB, in a Moscow court. AO Bank issued a package of guarantees in favor of a Russian company and reinsured the scheme with the German division of the group. Once the Russian client paid, AO Bank requested the counter-guarantees agreed with UniCredit in Germany, but the local division suspended the payment due to sanctions.

After the June 14 preliminary hearing, a Moscow court set the next hearing for the third quarter, UniCredit reported.

Last month, UniCredit reported a net profit of 2.7 billion euros for the second quarter of the current year, up 15.9% compared to the same period in 2023. "These excellent results were determined by net income of 6.3 billion euros in the second quarter of 2024, an increase of 6% compared to the previous year, supported by net interest income of 3.6 billion euros; 2.1 billion euros from commissions and 15 million euros - the provision for loan losses", the Italian bank stated in a statement.

In the second quarter of 2024, UniCredit's operating costs were 2.3 billion euros, reduced by 1.7% compared to the previous year.

Andrea Orcel, CEO of UniCredit, said: "For the first half and second quarter of this year, UniCredit published yet another record set of financial results. Our net profit increased by 16% to euro2.7 billion in the second quarter and by 20% to euro5.2 billion in the first half of the year, and our organic capital generation improved to 3.3 billion euros, respectively 6.7 billion euros for the second quarter and the first half of the year. All are records! All are the result of our ongoing transformation and are focused on prioritizing sustainable quality profitable growth while driving operational and capital excellence and long-term investment."