Raiffeisen Bank International AG and Societe Generale SA, the European banks with most at stake in Russia, led European lenders lower as the ruble continued its slide today, defying a surprise rate increase.
Raiffeisen fell as much as 10.3 percent to 11.40 euros in Vienna, the lowest level since it went public in 2005. Societe Generale dropped as much as 7.3 percent to 31.85 euros, hitting the lowest intraday level since August 2013. The STOXX 600 Banks index was 1.4 percent lower at 2:25 p.m. in London.
“More fundamental concerns are building over the outlook for Russia’s economy and the likely policy response,” Neil Shearing, an economist at Capital Economics in London, wrote in a note to clients. “There remains a huge amount of uncertainty at this juncture, but the key point is that there are no benign scenarios. Even if the ruble does stabilize over the coming weeks, the economic crisis facing Russia has much further to run.”
Societe Generale is the bank that has the biggest absolute exposure to Russia, at 25 billion euros ($31 billion), according to Citigroup Inc. analysts led by Kinner Lakhani. That’s equivalent to 62 percent of the Paris-based bank’s tangible equity. Raiffeisen has 15 billion euros at risk in Russia, almost twice its tangible equity, and it also has the biggest exposure to Ukraine, with 4.9 billion euros, according to Citigroup.
UniCredit, the third European bank strongly invested in the former Soviet Union, has 18 billion euros at stake in Russia, or 40 percent of its tangible book value, Citigroup said.
The ruble plunged to 80 a dollar for the first time today as investors speculated Russia will announce capital controls after the largest interest-rate increase in 16 years failed to revive confidence in the currency. The currency sank as much as 19 percent to 80.10, before trading at 78 at 3:14 p.m. in Moscow. That was the biggest drop since 1998, the year Russia defaulted on its local debt.