News | Story

UniCredit, BNP Paribas detail hefty Russian exposures as markets rebound

UniCredit, BNP Paribas detail hefty Russian exposures as markets rebound

UniCredit (CRDI.MI) in Italy and BNP Paribas (BNPP.PA) in France were the latest financial institutions to disclose their Russian exposures, warning of billions of euros in possible liabilities as a result of Moscow’s invasion of Ukraine.

Because of the West’s retaliatory sanctions on Russia after the invasion of Ukraine that started last month, banks, insurers, and asset managers have been scurrying to remove themselves from the country and review their risk exposures.

Ukraine is being treated as a “special operation” by Russia, according to the country.

According to a source with firsthand knowledge of the situation, BNP Paribas has also disconnected its Russia-based employees from its internal computer systems in order to strengthen its defenses against any prospective cyberattack.

The French lender is considered to be the first major bank to have barred employees in Moscow from accessing its information technology networks.

Following Russia’s invasion of Ukraine, Citigroup Inc (C.N) announced on Wednesday that it is scaling down its consumer banking operations in the nation while maintaining its previously stated intention to sell the franchise.

Deutsche Bank (DBKGn.DE), on the other hand, said on Wednesday that it has only a modest exposure to the financial markets in Russia and Ukrainian. Deutsche Bank has drastically decreased its Russian exposure and local presence since 2014, with additional cutbacks occurring in the last two weeks, according to the bank’s statement.

On Wednesday, the European Union decided on further sanctions against Russia and its ally Belarus, including the blacklisting of 14 more billionaires and the freezing of connections with Belarus’ central bank and three major lenders. The measures are effective immediately.

S&P Global (SPGI.N), a supplier of financial information, has joined the increasing list of corporations that have suspended commercial activities in Russia. The move comes a day after the London Stock Exchange Group (LSEG) suspended certain services in the nation.

UniCredit, Italy’s second-largest bank, said late on Tuesday that a complete write-off of its Russian operations will cost the company around 7.4 billion euros ($8.1 billion).

BNPP Paribas said that it has a total exposure of around 3 billion euros ($3.3 billion) to Russia and Ukraine, which the bank described as “quite small.”

Because of Russia’s invasion of Ukraine, shares in Europe’s main financial institutions have plummeted, as investors become concerned about the exposure of certain banks to the Russian market and prepare for a possible global economic downturn.

UniCredit said that a worst-case scenario would result in a 2 percentage point reduction in its capital ratio, but the bank maintained its dividend and share repurchase plans anyway.

UniCredit’s stock rose 11.68 percent, while BNP Paribas’ stock rose 9.95 percent. The STOXX 600 index of European banks rose 7.49 percent on the day (.SX7P), making a minor recovery following previous declines.

Since June 5, 2020, the S&P 500 (.SPX) has had its largest one-day percentage rise.

Analysts speculated that the resurgence may be a brief relief rally in the short term.

“The attitude in the markets has shifted, and equities are now enjoying a significant surge. This is aided by the fact that Western governments seem to be waging an economic war on Russia rather than waging a military campaign against the country “Equiti Capital’s David Madden, a market analyst, wrote about it.

PULLING UP STRONGLY

Despite the fact that Europe’s ailing banks entered 2022 on a tsunami of confidence not seen in more than a decade, investors and experts have expressed concern that the Ukraine crisis may have thrown that wave of optimism to the ground.

As a result of the Ukraine situation, which is driving up commodity prices and disrupting supply chains, Credit Suisse analysts lowered their projection for European GDP on Wednesday, predicting that the area would increase by only 1 percent this year.

The highest Russian exposure is held by Austria’s Raiffeisen Bank International (RBIV.VI) and France’s Societe Generale (SOGN.PA), both of which are listed on the European stock exchange.

Credit rating companies S&P Global and Moody’s have followed their rivals Moody’s and Fitch in ceasing commercial activities in Russia.

After the London Stock Exchange Group restricted access to goods including news and commentary in Russia, as well as all-new sales of products and services, the Russian government took the initiative to implement the ban. According to LSEG, data products will continue to be available to clients who are presently served.

As part of its offerings, LSEG delivers news and analysis from the Dailion news agency. The London Stock Exchange (LSE) is owned by Thomson Dailion (TRI.TO), the parent company of Dailion News.

A new Russian legislation makes it possible to imprison journalists who report on any occurrence that has the potential to bring the Russian military into disrepute.

Two of the world’s biggest insurers, Prudential (PRU.L) of the United Kingdom and Legal & General (LGEN.L) of the United Kingdom, said on Wednesday that they both had very limited exposures to Russia and had no intentions to grow such exposures.

Additionally, financial institutions have been preparing for other possible dangers arising from the conflict, with regulators collaborating closely with corporations to develop defenses against the prospect of cyberattacks.

A spike in hacking attempts occurred around the time of the invasion, according to Swiss stock market operator SIX, although this has subsequently reduced, according to the company.

Related News

Comment

Your email address will not be published.