ING's Delayed Russian Unit Sale: Strategic Implications for European Financials in Emerging Markets

The recent delay in ING's sale of its Russian unit to Global Development JSC underscores the growing challenges European financial institutions face in politically volatile emerging markets. Initially expected to close in Q3 2025, the transaction now faces regulatory hurdles, with the buyer awaiting approvalsING facing delay in completing the sale of its Russian unit^[1]. This delay, while not altering ING's long-term exit strategy, highlights the fragility of capital reallocation in regions marked by geopolitical instability. For European banks, the case of ING serves as a cautionary tale about the interplay between risk reassessment, regulatory complexity, and strategic capital management.

Strategic Implications for ING and European Financials

ING's decision to divest its Russian operations, announced in January 2025, was driven by a combination of reputational, legal, and financial risks following Russia's 2022 invasion of UkraineEmerging markets: which sovereign debts are most vulnerable^[3]. The bank has already reduced its lending exposure to Russian clients by over 75% since 2022European Banks 2025: Between Turbulence and Transformation^[4], but the pending sale remains a critical step in its full withdrawal. The transaction is expected to result in a post-tax loss of approximately €700 million and a 7 basis point reduction in ING's Common Equity Tier 1 (CET1) ratioING facing delay in completing the sale of its Russian unit^[1]. While these figures are manageable given ING's strong earnings capacity, they reflect the broader financial toll of exiting high-risk markets.

The delay in the sale also illustrates the regulatory and geopolitical complexities of operating in emerging markets. As noted by Reuters, the buyer's inability to secure approvals underscores the heightened scrutiny faced by cross-border transactions in politically sensitive regionsING facing delay in completing the sale of its Russian unit^[1]. For European banks, this reinforces the need for agile risk management frameworks that account for both regulatory and geopolitical volatility.

Broader Trends in European Banking

ING's experience aligns with a broader trend of European financial institutions recalibrating their exposure to emerging markets. According to the European Banking Authority (EBA), while European banks remain resilient—with an average CET1 ratio of 15.8% and a return on equity (RoE) of 10.9% in 2024—supervisors have emphasized the need for vigilance against emerging risks, including geopolitical conflicts and climate changeEU Banks Enjoy Success, But Must Stay Vigilant About Emerging Risks^[2]. The EBA's warnings are particularly relevant for banks operating in regions like Turkey and Argentina, where currency depreciation and political instability have raised concerns about debt sustainabilityEmerging markets: which sovereign debts are most vulnerable^[3].

To mitigate these risks, European banks are increasingly prioritizing digital transformation and strategic consolidation. For example, UniCredit's acquisition of stakes in Commerzbank and Banco BPM reflects a sector-wide push to enhance operational efficiency and scaleEuropean Banks 2025: Between Turbulence and Transformation^[4]. These moves are not merely defensive; they represent a proactive reallocation of capital toward markets with more stable regulatory environments and growth potential.

Capital Reallocation and Risk Mitigation Strategies

The ING case also highlights the tension between capital preservation and market expansion. While European banks are maintaining robust capital buffers, the sector's earnings growth has plateaued, partly due to the shift away from high-risk emerging marketsEU Banks Enjoy Success, But Must Stay Vigilant About Emerging Risks^[2]. This trend is evident in the European Central Bank's (ECB) recent stress tests, which emphasized the need for liquidity resilience in the face of geopolitical shocksECB warns banks of liquidity risk from geopolitical shocks^[5].

For investors, the key takeaway is the growing importance of risk-adjusted returns. European banks are no longer prioritizing aggressive expansion in volatile regions but instead focusing on consolidating existing operations and investing in digital infrastructure. As noted in a 2025 EY report, European banks are allocating 12% more to IT and digital budgets in 2025, leveraging AI and blockchain to streamline compliance and reduce operational risksEuropean Banks 2025: Between Turbulence and Transformation^[4].

Future Outlook and Investment Considerations

Looking ahead, the ING case signals a shift in European banking strategy. While the sector remains resilient, the cost of exiting volatile markets—both financially and operationally—will likely deter future forays into high-risk regions. Instead, banks are expected to focus on markets with stable governance and regulatory clarity, such as Southeast Asia and parts of Latin America.

For investors, this reallocation presents opportunities in banks that are effectively balancing risk and growth. Institutions like ING, which are transparent about their exit strategies and financial impacts, may be better positioned to navigate the evolving landscape. Conversely, banks with significant exposure to politically unstable regions could face reputational and capital risks, as seen in the EBRD's warnings about Turkey's economic vulnerabilitiesEBRD raises Turkey 2025 growth forecast, flags political market risks^[6].

Conclusion

ING's delayed Russian unit sale is more than a regulatory hiccup—it is a microcosm of the challenges European banks face in emerging markets. As geopolitical tensions persist, the sector's ability to reallocate capital, invest in digital resilience, and maintain profitability will be critical. For investors, the lesson is clear: strategic agility and risk transparency will define the winners in a landscape where volatility is the new norm.