Russia Banks Jump After Excluded From U.S. Sanctions

OAO Sberbank and VTB Group, Russia’s two biggest banks, jumped after they were excluded from U.S. sanctions against Russian and Ukrainian officials.

Sberbank surged 7.7 percent to 76.71 rubles at 6:45 p.m. in Moscow, its biggest gain since May 2010, after losing almost one quarter of its value this year. VTB, the second-largest lender, climbed 3.4 percent to 3.33 kopeks.

President Barack Obama imposed sanctions on seven top Russian government officials today and added four others from Ukraine, including the former president, who the U.S. says threaten peace and security. The U.S. acted after a referendum in Crimea yesterday set in motion the process for the Black Sea Peninsula to leave Ukraine and join Russia. The U.S. has said it won’t recognize the vote, and administration officials said there was evidence of fraud including ballots that were pre-marked in some locations.

“Investors were planning for the worst and hoping for the best outcome,” Luis Saenz, head of equity sales and trading at BCS Financial Group in London, said by telephone. “Sberbank, which was one of the blue-chips that were sacrificed in our view unduly, is being bid up aggressively.”

VTB, headed by former diplomat Andrey Kostin, dropped as much 5 percent on March 5 after a newspaper reported the U.S. is threatening “Iran-style sanctions” against Russian banks should Moscow sends troops into eastern Ukraine. Sberbank plunged 14 percent two days earlier after Russian President Vladimir Putin’s buildup of troops in Crimea led to the biggest sell-off in Russian stocks for more than five years.

Market Sanctions

Iranian style sanctions on Russian financial companies would only happen if there is “significant escalation” on the ground in Ukraine, according to Bernie Sucher, a board member of Aton Capital and the former country head of Bank of America Merrill Lynch in Russia.

“The official sanctions are not as important as the sanctions on the marketplace,” Sucher said by telephone. “It’s more the damaging blows to the markets and the prospect of the reversal of Russia’s decade-long commitment to joining the world.”

Goldman Sachs Group Inc. and JPMorgan Chase & Co. last year signed contracts with Russia’s economy and finance ministries, respectively, to help set up meetings with investors and boost the country’s credit-standing. Wall Street executives, including Lloyd C. Blankfein and Jamie Dimon, are members of Prime Minister Dmitry Medvedev’s advisory committee on transforming Moscow into a financial center.

Secretary of State John Kerry told Congress last week that a “very serious series of steps” will come today from the U.S. and the EU if Russia moved to annex Ukraine’s southern Crimea region.

EU foreign ministers agreed today to freeze assets and impose visa travel bans on 21 Russians, Crimeans and former Ukrainian officials.

The EU’s first salvo of sanctions falls short of “additional and far-reaching consequences” the bloc floated on March 6, highlighting divisions within the EU over how close the blacklist should come to Putin’s inner circle to dissuade him from moving further into Ukraine without severing deep trade ties between Russia and the West.

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