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European bank shares stop sliding, Russia’s Sberbank exits Europe

FILE PHOTO: The Raiffeisen Bank logo on the top of the building is seen behind the statue of Soviet state founder Leninin Moscow
FILE PHOTO: The logo of Raiffeisen Bank atop a building is seen behind a statue of Soviet state founder Vladimir Leninin Moscow, Russia, June 14, 2016. REUTERS / Maxim Shemetov

March 2, 2022

By Tom Sims and Carolyn Cohn

FRANKFURT/LONDON (Reuters) – European bank shares stopped sliding on Wednesday after falling to an almost 11-month low as the impact of the Ukraine crisis forced the closure of the European branch of Russia’s Sberbank. door.

Russia has shown no intention of stopping its attack on Ukraine, which has triggered heavy sanctions on Moscow and led to major companies pulling out of the Russian market.

US President Joe Biden warned Vladimir Putin that the Russian leader “didn’t know what was going to happen”. Russia calls its actions in Ukraine a “special operation”.

On Wednesday, the European Union said it had excluded seven Russian banks from the SWIFT messaging system, but had stopped including those that process energy payments.

Meanwhile, Sberbank, which reports record profits in 2021, said it would leave the European market as its subsidiaries face large cash flows and threats to security. safety of employees and property.

The move by Russia’s largest lender seemed inevitable after its European branch was closed by order of the European Central Bank.

Sberbank operates in Austria, Croatia, Germany, and Hungary, among other countries, and had European assets worth 13 billion euros ($14.4 billion) as of December 31, 2020. Its London-based stock is down 99.9% so far in 2022. “All sellers, no buyers,” a London-based trader said on Wednesday.

Regulators are also preparing for the possible closure of the European branch of Russia’s second-largest bank, VTB Bank, amid growing concerns about the impact of sanctions, Reuters reported. reported on Wednesday.

Credit rating agency Fitch said the asset quality of Western European banks would come under pressure as a result of the sanctions and they would also face “significantly increased operational risk”.

An index of leading European bank shares gained 1.39% on Wednesday, erasing initial losses that were behind Tuesday’s 5.6% decline and Monday’s 4.5%. Earlier, on Wednesday, the index hit its lowest level since April 2021, down 27% from the previous month’s high.

Austria’s Raiffeisen Bank International, which has been operating in Russia since the collapse of the Soviet Union 30 years ago, was one of the biggest bank failures to date this week.

Two people with knowledge of the matter told Reuters the bank was looking to leave Russia, a move that would make it the first European bank to do so since Moscow invaded Ukraine.

Raiffeisen stock, at half its value a month ago, offset some of its earlier losses on Wednesday to close down 2.66%.

Some financial officials are trying to calm the market.

Hungary’s OTP Bank, the largest independent lender in Central Europe, is very good and it can withstand further possible market shocks in Russia and Ukraine, Hungary’s central bank said in an email reply to Reuters.

Chief Financial Officer Mark Mason said Citigroup, which has $10 billion in exposure to Russia, could face billions of dollars in losses in the worst-case scenario, although they expect the actual loss to be smaller. position.

FACIAL ASSETS ONLY

German market regulator BaFin says it is closely monitoring the European branch of VTB Bank, which is no longer accepting new customers.

The bank is headquartered in Frankfurt, with assets of 8.1 billion euros at the end of 2020.

On Tuesday, Russia said it was placing temporary restrictions on foreigners seeking to get rid of Russian assets, as it tries to stem the emigration of investors.

But investors are continuing to reduce assets. Aviva CEO Amanda Blanc will divest its investments in Russia “as soon as we can.”

Financial companies are trying to keep up with the situation.

Dubai’s Mashreqbank has stopped lending to Russian banks and is reviewing its current exposure to the country, Reuters reports.

The move is one of the first reported cases of a Middle East bank suspending ties with Russia and underscores growing anxiety globally about violating Western sanctions. West.

France’s BNP Paribas said it was working to maintain its operations as much as possible at its Ukraine branch Ukrsibbank, which has nearly 5,000 employees.

A task force at Germany’s Commerzbank, which has a subsidiary in Russia, is meeting several times a day, a board member said.

(1 dollar = 0.9022 euros)

(Additional reporting by Gergely Szakacs, Zuzanna Szymanska, Saeed Azhar and Yousef SabaEditing by Jane Merriman and Rosalba O’Brien)

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Caroline Bleakley

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