Western banks set to hit $10 billion by pulling out of Russia

Western banks are bracing for a $10 billion hit in their forays into Russia as they prepare to pull out of the country due to its invasion of Ukraine.

International sanctions have forced banks to consider turning their backs on a country some lenders first entered more than a century ago.

This week, a series of European banks set aside billions of euros in provisions ahead of the shutdown of their operations in Russia, following similar moves by US lenders last month. Western banks collectively have $86 billion of exposure to Russia – with nearly 40,000 employees – and are setting aside more than $10 billion in anticipation of losses on their businesses, according to Financial Times calculations.

Italian lender UniCredit this week set aside 1.3 billion euros to cover potential losses, warning it could face a loss of 5.3 billion euros if its entire Russian business was wiped out. “I’m sure you’ve noticed the speed of change in terms of . . . waves of sanctions,” UniCredit chief executive Andrea Orcel said.

The bank, which has 4,000 employees and 2 million customers in the country, has been present in Russia for 17 years.

Societe Generale, the French lender that first entered Russia 150 years ago, made 561 million euros in provisions for the first quarter, mostly related to the war in Ukraine.

The bank said last month it had agreed to sell its subsidiary Rosbank to an investment firm founded by billionaire Vladimir Potanin and expects the sale to reach 3.1 billion euros (3.3 billions of dollars). The French lender has 3.1 million retail customers in Russia and 18 billion euros of exposure in the country. Rosbank employs 12,000 people.

French bank Credit Agricole on Thursday announced a provision of 389 million euros for its exposure to Russia and said it was writing down 195 million euros for the total equity value of its Ukrainian operations.

Austrian Raiffeisen has 4.2 million customers and 9,400 employees in Russia, with 22.9 billion euros in assets in the country – the most exposed of all foreign banks. Its 319 million euros in provisions for bad debts in the first quarter were mainly related to the war in Ukraine.

Credit Suisse said last month it lost 206 million Swiss francs ($211 million) related to Russia’s invasion of Ukraine, with 148 million Swiss francs in business losses and 58 million Swiss francs in credit losses.

Chief executive Thomas Gottstein said most of the bank’s 125 employees nationwide are currently on paid leave as the bank assesses how much to scale back operations. About 4% of the group’s wealth management assets, or 28 billion Swiss francs, are linked to Russian clients.

Another Swiss lender, UBS, said it had reduced its risk exposure by a third to $400 million since the start of the year, but that had resulted in costs of $100 million.

UBS added that EU and Swiss rules prohibiting taking deposits of more than 100,000 euros from Russians not allowed to live in the European Economic Area affected 0.7% of its assets. wealth management division.

Among U.S. lenders, Citigroup disclosed the largest direct exposure to Russia, warning of up to $3 billion in potential losses from its operations in the country. Last month, the bank earmarked $1 billion for its exposure to Russia.

Citigroup has been trying to divest its Russian consumer bank since last year and announced in March that it would expand its exit from Russia to include other operations.

JPMorgan Chase said it has provisioned about $300 million to cover writedowns on loans associated with Russia, although chief executive Jamie Dimon warned investors in early April that the bank could lose up to $1 billion on its loan. exhibition in the country.

Goldman Sachs in March had $260 million in credit exposure, compared to $650 million in December. The bank said in its first-quarter results that it suffered a net loss of about $300 million on investments related to the country and Ukraine. Goldman also said it was “terminating” its Russian business while JPMorgan Chase “has been actively unwinding Russian business.”

Morgan Stanley said it had “limited” direct exposure to Russia after giving up its banking license in the country years before the invasion.