Finance

Deutsche, UniCredit, Societe Generale downplay Russia risks as bank shares tumble

International banks have played down the risks of their exposure to Russia as share prices have slumped in the wake of the invasion of Ukraine.

European banks’ shares tumbled after Russia’s invasion of Ukraine, as markets digest the knock-on effects of what could be the largest conflict since the second world war.

At the time of writing, share of Austria’s Raiffeisen Bank, which maintains a significant Russian presence, fell by nearly 21%. Italian lender UniCredit also has large exposure to Russia, at €12.5bn according to the European Central Bank, has suffered a 12.6% fall while French bank Societe Generale’s shares dropped by 11.6%.

READ Western banks, companies brace for fresh sanctions after Vladimir Putin’s full-scale invasion of Ukraine

Deutsche Bank, which has seen shares slip by 10.5%, said that it has “reduced our exposure to Russia significantly over recent years and the risks are well contained”.

A spokesperson for UniCredit said that its Russian subsidiary accounts for “around 3% of its total revenues and allocated capital” and that “all exposures are highly covered”.

Jefferies analyst Benjie Creelan-Sandford reiterated its buy rating on UniCredit and said that its exposure to Russia could be absorbed by its local subsidiary.

“Writing-off the Russian subsidiary appears absorbable which offers a degree of comfort on capital return prospects,” he wrote.

Societe Generale has around €18bn exposure to Russia largely through its local subsidiary Rosbank. A spokesperson said it was “confident in our ability to ensure the activity for our clients and to adapt where necessary”.

Most international lenders pulled back from Russia in the wake of its annexation of Crimea in 2014, and President Putin has moved to make the country less reliant on international lending. But the amount of capital in the country remains significant — banks are still owed $121.5bn by Russian companies, according to Bank for International Settlement numbers.

Russia’s invasion has even hit bank shares with little exposure. UBS was down 8.5% at the time of writing, while Barclays declined by 8.2%; BNP Paribas by 7.5%; Credit Suisse by 6.7% and HSBC by nearly 6%.

Speaking to journalists during its annual results Barclays chief executive officer, C S Venkatakrishnan, said it had been out of Russia for “many, many years” and had “exercised a lot of care and diligence on on-boarding Russian entities and Russian clients”.

HSBC boss Noel Quinn said it had revenues of $50m and around 200 employees in the country, meaning its exposure to Russia was “very modest”.

Wall Street banks have so far been spared from the rout, with Citigroup down by 4.4% and JPMorgan by 4.3%. Citi has around $5.5bn in loans, securities and other assets in Russia, according to its latest numbers, which amounts to around 0.3% of total assets.

JPMorgan has around 160 people in Russia, and is one of the top international investment banks in the region.

So far, sanctions on Russia from Western leaders have been restricted to a handful of small local banks, but UK prime minister Boris Johnson reportedly met with London-based bank executives to discuss the implications of implementing more stringent measures.

To contact the author of this story with feedback or news, email Paul Clarke

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