By Valentina Za
MILAN – European bank stocks have lost a fifth of their value over the past month amid the Ukraine crisis.
Western sanctions against Russia following its invasion of Ukraine have upended the financial sector, but the main hit to banks are the threats to the global economic outlook and the prospect of higher interest rates.
Investors worry banks will again need to hike loan loss provisions, which had been declining after the pandemic-driven spike in 2020. The crisis is also reducing the chances of higher interest rates, which would have boosted income from lending.
Some banks, however, are also directly exposed.
Italian and French banks have the largest Russianexposure, representing just over $25 billion each at the end ofSeptember, followed by Austrian banks with $17.5 billion, Bank of International Settlements https://stats.bis.org/statx/srs/table/b4?c=RU&f=pdf data shows.
U.S. bank exposure totals $14.7 billion, BIS data shows.
Following are some banks with significant Russianexposure.
Italy’s second-biggest bank said a full write-off of its Russian business, including cross-border and derivatives exposure, would cost around 7.4 billion euros ($8.1 billion), pushing its core capital ratio to around 13% from 15.03%.
UniCredit said it would still pay cash dividends for 2021 in the worst-case scenario where it zeroed its exposure, while plans for a 2.6 billion euro share buyback are contingent on its core capital ratio remaining above 13%.
UniCredit said its Russian client cross-border exposure stood at 4.5 billion euros, net of guarantees of around 1 billion euros.
It has also a direct exposure of 1.9 billion euros (net of currency hedges) to UniCredit Bank Russia, its local arm and Russia’s 14th largest lender.
UniCredit could also potentially suffer an up to 1 billion euro loss on derivatives if the rouble’s value fell to zero.
RAIFFEISEN BANK INTERNATIONAL (RBI)
RBI has operated in Russia since the collapse of the SovietUnion and its business there contributed almost a third of its net profit of 1.5 billion euros last year.
RBI’s Russian business holds 2.4 billion euros in capital, or 18% of consolidated equity. Russia’s 10th-largest bank by assets, it employs around 8,700 staff.
RBI’s said its overall Russian exposure totalled 22.85 billion euros file:///C:/Users/u8018106/OneDrive%20-%20Thomson%20Reuters%20Incorporated/Desktop/2022-02-02%20Presentation%20RBI.pdf at the end of last year, more than half relating to the corporate private sector.
The overall figure comprises 11.6 billion euros in customerloans (or 11.5% of group), more than 80% in roubles.
Cross-border exposure to Russia is only 1.6 billion euroswith no parent funding from Vienna. RBI also holds 2.2billion euros in loans to Ukrainian customers.
Societe Generale, which controls Rosbank, had 18.6 billion euros https://www.societegenerale.com/sites/default/files/documents/2022-02/Q4-21-Financial-Results-Presentation.pdf of overall exposure to Russia at the end of last year – or 1.7% of the group total.
More than 80%, or 15.4 billion euros, is held locally by Rosbank while cross-border exposure amounts to 3.2 billion euros, including 600 million euros in off-balance sheet items.
The French bank, which started doing business in Russia in 1872, left in 1917 and returned in 1973, said its Russian activities in 2021 represented 2.7% of group net income.
Last week it said it could withstand an extreme scenario where its Russian business is confiscated, which would shave only half a percentage point off its core capital.
Of SocGen’s Russian exposure, 41% is to retail and 31% to corporates. Exposure to Russian sovereign entities stands at 3.7 billion euros.
The French bank said its overall exposure to Russia, including both onshore and offshore items, was 6.7 billion euros, or 0.6% of its total commercial lending portfolio as of Dec. 31.
That comprises 2.9 billion euros of offshore exposure to 15 large Russian corporates, notably producers and exporters of commodities.
Credit Agricole operates in Ukraine and Russia through two fully-owned subsidiaries. Crédit Agricole Ukraine holds 226 million euros in equity. That of Russian arm CACIB AO, a subsidiary of Crédit Agricole CIB, stands at 150 million euros.
Credit Agricole said it was monitoring closely its exposures to Russia, but there would be no impact on its 2021 dividends.
The French bank unveiled on Wednesday a total exposure of around 3 billion euros ($3.3 billion) to Russia and Ukraine, sticking to its previously announced 2025 financial targets.
Italy’s biggest bank has financed major investment projectsin Russia, such as the Blue Stream gas pipeline. It handles more than half of all commercial transactions between Italy and Russia.
Intesa’s loan exposure to Russia was 5.57 billion euros atend-2021, or 1.1% of the total.
Its subsidiaries in Russia and Ukraine have assets, respectively, of 1 billion and 300 million euros, which together represent just 0.1% of the group total.
Intesa has said it was conducting a strategic review of its Russian presence.
The Dutch bank has around 4.5 billion euros in outstandingloans with Russian clients and around 600 million euros withclients in Ukraine, out of a total loan book worth more than 600billion euros.
The Swiss bank said on Monday its direct country risk exposure to Russia accounted for $634 million of its total emerging market exposure of $20.9 billion at end-2021.
Citi said last week its total exposure to Russia amounted to nearly $10 billion and it was working to bring it down.
That comprises third-party exposures worth $8.2 billion, of which $1.0 billion in cash at the Bank of Russia and other financial institutions and $1.8 billion of reverse repos.
Citi also has $1.6 billion of exposures to additional Russian counterparties outside of its Russian subsidiary that are not included in that $8.2 billion.
By comparison, Goldman Sachs reported last month $293 million in net exposure to Russia, as well as a total of $414 million of market exposure as of December 2021.
($1 = 0.9016 euros)
(Reporting by Valentina Za; Editing by Alexander Smith and Gareth Jones)