By Mateusz Rabiega and Tommy Reggiori Wilkes

LONDON (Reuters) -Dutch bank ING Groep said on Tuesday it had reached an agreement to sell its business in Russia to local company Global Development JSC, taking a 700-million-euro ($730 million) hit to its profits and showing that Western banks still have a route to exit the country.

Only a handful of Western banks, including Austria's Raiffeisen, and Italian lenders UniCredit and Intesa Sanpaolo are still operating in Russia nearly three years after the war in Ukraine began.

Under ING's agreement, the Russian firm, owned by a Moscow-based financial investor, will buy all of the shares of ING Bank (Eurasia) JSC with an intention to serve customers in the country under a new brand, ING said in a statement.

It did not disclose the financial terms of the sale.

ING entities outside of Russia that are not part of this sale still have lending exposure to Russian companies, which the bank said it would reduce from the 1 billion euros it totalled in September.

"We anticipate to see material reductions in 2025 and 2026, though there also is a tail end of loans that may remain for some time," an ING spokesperson said in an emailed statement.

Western banks began pulling out of Russia after Moscow's invasion of Ukraine in 2022 triggered a wave of economic sanctions on the country.

Raiffeisen is the biggest Western bank still in Russia. It has made billions of profits in the past three years by acting as a payment bridge for Russia's middle class and companies into the West.

Italy's UniCredit also has a sizeable Russian business. Both banks have faced pressure from Washington and European officials to speed up their exit.

Banks need approval from Russian authorities before selling assets, which lenders say has made it hard to leave. Intesa Sanpaolo's CEO said last year it had cut its overall exposure to Russia to a "negligible" level but it was hard to dispose completely of its local subsidiary.

ING's sale of its Russian operations, which the bank said still needs regulatory approvals from Russia and the EU, is expected to conclude in the third quarter of 2025.

The bank said that since Russia's invasion of Ukraine, it had taken no new business with Russian companies, separated the subsidiary from its larger network and slashed its lending exposure.

Shares in ING rose 0.35% at 1410 GMT, slightly lagging other European banking stocks.

($1 = 0.9586 euros)

(Reporting by Mateusz Rabiega in Gdansk and Tommy Reggiori Wilkes in London; Editing by Jacqueline Wong, Milla Nissi, Kim Coghill and Sharon Singleton)