Explainer-Global banks count cost of Russia exposure

3 mins read
FILE PHOTO: A logo of UniCredit is seen in downtown Milan

By Valentina Za

MILAN – The Ukraine conflict has prompted many international banks to review their presence in Russia, or swiftly embark on the arduous task of unwinding their businesses there.

Some banks have disclosed the maximum hit they could suffer in a worst-case scenario, but a more accurate estimate of the actual losses they are set to bear will require time.

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 data shows.

U.S. bank exposure totals $14.7 billion, BIS data shows.

Following are details on the banks most exposed:

Graphic: European banks’ exposure to Russia: https://fingfx.thomsonreuters.com/gfx/mkt/xmvjoeqdkpr/IMAGE%20MOODYS.png

EUROPEAN BANKS

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RAIFFEISEN BANK INTERNATIONAL (RBI)

RBI has said it is considering a possible withdrawal from Russia, where it has operated since the collapse of the SovietUnion. Business there contributed almost a third of RBI’s 2021 net profit of 1.5 billion euros.

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 9,000 staff.

RBI’s overall Russian exposure totalled 22.85 billion euros at the end of last year, more than half relating to the corporate private sector.

It comprises 11.6 billion euros in customer loans (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

Societe Generale had 18.6 billion euros of overall exposure to the country at end-2021 – or 1.7% of the group total. Its Russian unit Rosbank has around 200 branches and 12,000 staff, which rise to 15,000 for all group activities.

More than 80% of the exposure, or 15.4 billion euros, is held locally by Rosbank, with only 3.2 billion euros cross-border, 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.

SocGen calculated it would lose half a percentage point of its core capital ratio in an extreme scenario where its Russian business is confiscated.

Of SocGen’s Russian exposure, 41% is to retail and 31% to corporates. Exposure to Russian sovereign entities stands at 3.7 billion euros.

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UNICREDIT

Italy’s second-biggest bank is evaluating exiting Russia, where it runs the country’s 14th largest bank with 4,000 staff.

A full write-off of UniCredit’s Russian business, including cross-border and derivatives exposure, would cost around 7.4 billion euros ($8.1 billion), pushing the core capital ratio to around 13% from 15.03%.

UniCredit’s cross-border exposure to Russian clients is 4.5 billion euros, net of guarantees. The direct exposure is 1.9 billion euros net of currency hedges.

It could also suffer an up to 1 billion euro loss on derivatives if the rouble’s value fell to zero.

UniCredit will still pay cash dividends for 2021 in a worst-case scenario, while a planned 2.6 billion euro share buyback hinges on core capital staying above 13%.

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INTESA SANPAOLO

Italy’s biggest bank is analysing its exposure to Russia and Ukraine which, net of guarantees, amounts to 5.1 billion euros in loans and 0.6 billion in off-balance sheet items. Some 200 million euros in loans are to sanctions-hit entities.

Intesa, which serves corporate clients in Russia with a staff of 980, is conducting a strategic review of its presence.

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CREDIT AGRICOLE

The French bank’s exposure to Russia – both onshore and offshore – is 6.7 billion euros, or 0.6% of its commercial lending portfolio as of Dec. 31.

That includes 2.9 billion euros of offshore exposure to 15 large Russian corporates, notably producers and exporters of commodities. Fully-owned subsidiaries in Ukraine and Russia together hold 376 million euros in equity.

Credit Agricole is monitoring closely its Russia exposures, but ruled out any impact on 2021 dividends.

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BNP PARIBAS

The French bank has unveiled a total exposure of around 3 billion euros ($3.3 billion) to Russia and Ukraine, sticking to its previously announced 2025 financial targets.

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ING

The Dutch bank has 5.3 billion euros in loans to Russian customers, or 0.9% of its loan book. About 700 million euros are affected by new sanctions.

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DEUTSCHE BANK

The German bank, which has said it would wind down its Russian business reversing its previous stance, had gross exposure to Russia of 2.9 billion euros at end-2021.

It comprises 1.4 billion euros of loan exposure (0.3% of its loan book) and 1.5 billion euros of contingent risks relating mostly to undrawn commitments. The loan exposure is 600 million euros net of guarantees and asset collateral.

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COMMERZBANK

The German lender has reduced its exposure to Russia to 1.3 billion euros from 1.9 billion in recent weeks.

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CREDIT SUISSE

The Swiss bank is reviewing its Russian operations after disclosing that roughly 4% of assets in its core wealth management business belong to Russian clients.

It had initially disclosed only a gross credit exposure of 1.57 billion Swiss francs ($1.7 billion) to Russia at end-2021, or 848 million net of hedges.

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UBS

Switzerland’s biggest bank has said its direct exposure to Russia accounted for $634 million of its total emerging market exposure of $20.9 billion at end-2021.

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U.S. BANKS

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CITIGROUP

The most impacted among U.S. banks, Citi has Russia exposure of $9.8 billion. It could lose nearly half in a worst-case scenario, it has said, as it speeds up plans to withdraw.

The total comprises $8.2 billion in third-party exposures, and a further $1.6 billion outside of its Russian subsidiary.

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GOLDMAN SACHS, JPMORGAN

Both banks have said they are actively winding down their Russian business. Goldman had flagged a Russia credit exposure of $650 million. JPM has 160 staff in Moscow.

($1 = 0.9016 euros)

(Reporting by Valentina Za; Editing by Toby Chopra)

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