Russia Crisis May Cost 12 Banks $9.3 Billion, Deutsche Bank Says

Twelve European banks may lose a combined 7.5 billion euros ($9.3 billion) and see their capital buffers shrink if Russia suffers a financial crisis similar to that of the late 1990s, analysts at Deutsche Bank AG wrote.

Raiffeisen Bank International AG, Societe Generale SA and UniCredit SpA would be among the most affected, with each reporting more than 1 billion euros in post-tax losses under such a scenario, including 11 percent losses on loans in the country, analysts including London-based David Lock and Omar Keenan wrote in a note to clients.

“Russia will likely be a source of consensus downgrades from impairments,” the Deutsche Bank analysts said.

Yesterday, the ruble plunged to 80 per dollar for the first time as investors speculated Russia will announce capital controls after the largest interest-rate increase in 16 years failed to revive confidence in the currency.

Loan losses in the 1990s-style scenario would threaten capital levels at Raiffeisen, while other lenders should be able to manage the losses, Deutsche Bank said. Raiffeisen would see its common equity Tier 1 ratio, a measure of financial strength, cut by about 166 basis points, while Societe Generale’s ratio would fall about 55 basis points and UniCredit’s about 31 basis points, Deutsche Bank said.

In Deutsche Bank’s “extreme scenario,” where the examined banks all had to entirely shut down their Russian operations, Raiffeisen, Aareal Bank AG, Commerzbank AG and Nordea Bank AB would suffer the most, with Raiffeisen’s CET1 ratio falling 453 basis points.

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