Raiffeisen, SocGen Drop as Russia-Ukraine Tensions Mount
Raiffeisen, the Austrian bank that owns the biggest foreign lender in Ukraine, slumped 8.3 percent to 23.15 euros by 4:31 p.m. in Vienna. Societe Generale, the foreign bank with the largest branch network in Russia, fell 4.9 percent to 46 euros in Paris. The Bloomberg Europe Banks and Financial Services Index fell as much as 3.1 percent, its largest intraday drop since August.
“The main worries would be some kind of default of Ukraine and a slowdown of both Ukrainian and Russian economies that would reduce the earnings growth potential of the banks exposed to the region,” said Karim Bertoni, an analyst at de Pury Pictet Turrettini & Cie. in Geneva “The sentiment and volatility will continue to be affected but the risks of a real meltdown are remote.”
Russia unexpectedly raised its key interest rate by 1.5 percentage points as the threat of President Vladimir Putin invading Ukraine prompted the biggest stock-market sell-off in five years and the ruble plunged. Bank Rossii, Russia’s monetary authority, moved to shore up Russian assets after the country took control of Ukraine’s Crimea region and Putin won his Parliament’s approval to send troops into Ukraine.
Raiffeisen halted the sale of its Ukrainian unit due to the current situation, Ingrid Krenn-Ditz, a spokeswoman, said today. Raiffeisen Bank Aval has 43.5 billion hryvnia ($4.2 billion) in assets, making it the country’s fifth-biggest lender. UniCredit SpA (UCG), based in Milan, had 43.1 billion hryvnia of assets and OAO Sberbank of Russia (SBER) 35.1 billion hryvnia at the end of the year, central bank figures show. Russia’s VTB, BNP Paribas SA (BNP) of Paris and OTP Bank Nyrt are also among the 20 biggest lenders in the country.
Sberbank plummeted as much as 18 percent in Moscow, hitting a two-year low on an intraday basis. VTB declined by 21 percent, falling to the lowest since September 2011. UniCredit declined 5.4 percent and BNP Paribas tumbled 3.2 percent.
Societe Generale, France’s second-largest bank by market value, agreed to increase its controlling stake in Moscow-based OAO Rosbank last year by buying VTB’s 10 percent stake. It has “negligible” exposure in Ukraine, where it employs about 80 people at its car-fleet management and equipment financing units, it said today.
Raiffeisen and UniCredit, the two European banks most exposed to Ukraine, may have to provide more funding to their local divisions as the country comes closer to defaulting on its debt, Moody’s Investors Service said last week.
UniCredit Bank in Ukraine temporarily suspended operations at its branches in Simferopol because of an escalation of the situation in Crimea, the lender said in a statement on its website today. Raiffeisen’s branches are all operating, including the 32 in Crimea, it said. Both lenders set limits for cash withdrawals.
Raiffeisen reported a profit in Ukraine last year, even with 33 percent of its loans non-performing. UniCredit’s local unit swung to a pretax loss of 63 million euros in the first nine months of 2013 as bad-debt provisions soared and revenue plummeted. Chief Executive Officer Federico Ghizzoni, who merged the bank’s two Ukrainian units last year, has said the bank may scale back operations in the country.
European banks operating in Ukraine are involved only with “very moderate” amounts, said Daniele Nouy, head of the European Central Bank’s new bank supervisory board, in an interview with France’s BFM Business television today.
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