European bank shares stop falling, and Russia’s Sberbank exits Europe

FRANKFURT/LONDON (Reuters) – European bank shares halted their decline on Wednesday after falling to their lowest level in nearly 11 months due to the fallout from the Ukraine crisis that forced the European arm of Russia’s Sberbank. (SBER.MM) to close.

Russia showed no intention of stopping its attack on Ukraine, which led to heavy sanctions on Moscow and led to the exodus of major companies from the Russian market. Read more

US President Joe Biden warned Vladimir Putin that the Russian leader “has no idea what’s to come.” Russia describes its Ukrainian actions as a “special operation”. Read more

The European arm of Sberbank, Russia’s largest lender, was closed by order of the European Central Bank. Read more

Regulators are also preparing for a possible shutdown of the European arm of Russia’s second largest bank, VTB Bank (VTBR.MM)Amid growing concerns about the impact of the sanctions, Reuters reported on Wednesday. Read more.

Sberbank, which reported record profits in 2021, said it was leaving the European market as its subsidiaries faced large cash outflows and threats to the safety of employees and property. Read more

Sberbank operated in Austria, Croatia, Germany and Hungary, among other countries, and had European assets of €13 billion ($14.41 billion) as of December 31, 2020.

Sberbank’s London depository receipts are down 99.9% so far in 2022. “Not all sellers are buyers,” a London trader said on Wednesday.

The impact of the crisis and sanctions is expected to have repercussions on European banks.

“The asset quality of major Western European banks will come under pressure from the fallout from the Russian invasion of Ukraine,” credit rating agency Fitch said on Wednesday.

“Banks also face substantially increased operational risks,” she added.

Index of leading European bank stocks (.SX7P) up 0.1% by midday on Wednesday, erasing early losses that came on top of the 5.6% drop on Tuesday and 4.5% on Monday. Earlier on Wednesday, the index hit its lowest level since April 2021, down 27% from its highest level last month.

Austrian International Bank Raiffeisen (RBIV.VI)which has been operating in Russia since the collapse of the Soviet Union thirty years ago, had one of the biggest declines this week so far.

Two people familiar with the matter told Reuters that the bank is considering leaving Russia, in a move that would make it the first European bank to do so since Moscow’s invasion of Ukraine. Read more

Shares of Raiffeisen, which account for half their value a month ago, fell 4.7%.

Some financial officials are trying to reassure the markets.

The Hungarian Central Bank said in an email response to Reuters that the capital position of Hungarian OTP Bank, the largest independent bank in Central Europe, is excellent and the bank can withstand further potential market shocks in Russia and Ukraine. Read more

storage assets

German market regulator BaFin is closely watching the European arm of Russia’s VTB Bank (VTBR.MM), which is no longer accepting new clients. The bank, headquartered in Frankfurt, had €8.1 billion in assets at the end of 2020.

Russia said on Tuesday it was imposing temporary restrictions on foreigners seeking to exit Russian assets, as it tries to stem a decline in investors driven by tough Western sanctions.

But investors continue to dump assets. Aviva (AV.L) Chief Executive Officer Amanda Blank said Wednesday that the fund management business will deprive its small exposure to Russia “as quickly as practicable.”

Financial companies are striving to keep pace with the situation.

Mashreq Bank in Dubai (MASB.DU) Two sources familiar with the matter told Reuters that it is halting Russian bank lending and is reviewing its current exposure to the country. Read more

The move is one of the first reported cases of a Middle Eastern bank cutting ties with Russia, and underscores growing global tension from falling into the trap of Western sanctions.

French bank BNP Paribas (BNPP.PA) She said it is working to maintain its activities as much as possible in its Ukrainian arm Ukrsibbank, which has nearly 5,000 employees.

One of the board members said that a task force at Germany’s Commerzbank, which has a branch in Russia, meets several times a day.

Aki Hussein, CEO of Hiscox (HSX.L)Lloyd’s of London insurer, said it provided cover for international companies in Ukraine.

“We are securing these offices and some of the people there, working closely with our customers for the past eight weeks and effectively – as often as they want – helping them leave the country and evacuate their staff.”

(1 dollar = 0.9022 euros)

Additional reporting by Gergeli Szakas, Zuzana Szymanska, Saeed Azhar and Youssef Saba; Editing by Paul Carrell, Tomasz Janowski and Jane Merriman

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