January 31, 2022: -On Friday, UniCredit CEO Andrea Orcel confirmed the Italian bank had dropped a potential deal targeting Russian bank Otkritie but was happy with its presence in the country.

Reports of UniCredit’s interest in the bailed-out Russian lender, which the central bank is looking to reprivatize through a public listing, had hurt the Italian bank’s shares at a time of mounting tensions over Ukraine.

Confirming a report in the Russian press, a source had told Reuters that UniCredit would not go ahead with the deal this week.

CEO Andrea Orcel confirmed that the acquisition had been halted on a newswire call on Friday.

“We were evaluating the possibility of contributing our Russian operations into Otkritie in exchange for a controlling stake … in the planned IPO,” Orcel said.

The former UBS investment banker said that UniCredit’s exposure to the country would not have increased significantly in this way. Still, the combination offered scope for synergies and provided a better market positioning.

“Given the geopolitical environment, we decided to withdraw,” he said.

He added UniCredit’s operations in Russia, where it ranks as the 12th-largest lender, provided returns that had always been in line or above the local cost of equity.

“We’re generally happy with it and committed to it,” he said, adding that the Russian business did not meaningfully affect UniCredit’s risk profile is less than 5% of group equity.”