FRANKFURT / LONDON, March 2 – Shares of European banks halted on Wednesday after falling to their lowest level in nearly 11 months due to the effects of the crisis in Ukraine, which forced Russia’s European subsidiary Sberbank. MM) close.
Russia has shown no intention of halting its attack on Ukraine, which has sparked heavy sanctions against Moscow and led to the eviction of large companies from the Russian market. Read more
US President Joe Biden has warned Vladimir Putin that the Russian leader “has no idea what’s next.” Russia calls its actions in Ukraine a “special operation.” Read more
Sberbank’s European branch, Russia’s largest lender, was closed by order of the European Central Bank. Read more
Regulators are also preparing for the possible closure of the European branch of Russia’s second-largest bank, VTB Bank (VTBR.MM), amid growing concerns about the impact of the sanctions, Reuters reported on Wednesday. Read more .
Sberbank, which reported record profits in 2021, said it was leaving the European market as its subsidiaries there faced large cash flows and threats to the safety of employees and property. Read more
Sberbank operates in Austria, Croatia, Germany and Hungary, among others, and has European assets worth 13 billion euros ($ 14.41 billion) on December 31, 2020.
Sberbank’s depository receipts in London have fallen 99.9% so far in 2022. “Not all sellers have buyers,” a London retailer said on Wednesday.
The impact of the crisis and sanctions are expected to have consequences for European banks.
“The quality of the assets of major Western European banks will be under pressure from the effects of the Russian invasion of Ukraine,” the credit rating agency Fitch said on Wednesday.
“Banks also face significantly increased operational risk,” he added.
The index of shares of leading European banks (.SX7P) rose 0.1% by noon on Wednesday, erasing early losses, which peaked at 5.6% on Tuesday and 4.5% on Monday. Earlier on Wednesday, the index reached its lowest level since April 2021, down 27% from last month’s highs.
Austria’s Raiffeisen Bank International (RBIV.VI), which operated in Russia since the collapse of the Soviet Union thirty years ago, was one of the biggest to fall this week.
The bank is considering leaving Russia, two people familiar with the matter told Reuters that it would be the first European bank to do so since Moscow’s invasion of Ukraine. Read more
Raiffeisen Bank logo on top of building seen behind statue of Soviet founder Vladimir Lenin Moscow, Russia, June 14, 2016. REUTERS / Maxim Shemetov
Shares of Raiffeisen, which are half lower than a month ago, fell 4.7%.
Some financial officials are trying to calm the markets.
The capital position of Hungary’s OTP Bank, Central Europe’s largest independent lender, is excellent and the bank can withstand additional possible market turmoil in Russia and Ukraine, the Hungarian central bank said in an email to Reuters. Read more
DISPOSAL OF ASSETS
German market regulator BaFin is closely following Russia’s European division, VTB Bank (VTBR.MM), which no longer accepts new customers. The Frankfurt-based bank had 8.1 billion euros in assets at the end of 2020.
On Tuesday, Russia said it was imposing temporary restrictions on foreigners seeking to leave Russian assets as it sought to halt investor withdrawals led by crippling Western sanctions.
But investors continue to lose assets. Aviva’s fund management business (AV.L) will give up its small exposure to Russia “as soon as we can,” CEO Amanda Blanc said on Wednesday.
Financial companies are struggling to keep up with the situation.
Dubai’s Mashreqbank (MASB.DU) has stopped lending to Russian banks and is reviewing its existing exposure to the country, two sources familiar with the matter told Reuters. Read more
The move is one of the first reported cases of a bank in the Middle East breaking off ties with Russia and highlighting growing global nervousness over violating Western sanctions.
The French BNP Paribas (BNPP.PA) said it was working to maintain its operations as much as possible in its Ukrainian branch, Ukrsibbank, which has nearly 5,000 employees.
A working group at Germany’s Commerzbank, which has a subsidiary in Russia, meets several times a day, a board member said.
Aki Hussein, chief executive of Hiscox (HSX.L), said insurer Lloyd’s of London provides coverage for international business in Ukraine.
“We have insured these offices and some of the people there and worked closely with our clients for the last eight weeks and effectively – as much as they want – we are helping them leave the country and evacuate their staff.”
(1 dollar = 0.9022 euros)
Additional reports by Gergely Szakacs, Zuzanna Szymanska, Saeed Azhar and Yousef Saba Edited by Paul Carrel, Tomasz Janowski and Jane Merriman
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