Global finance grapples with Ukraine crisis as stocks tumble


  • Bank stocks slide; Austrian RBI down 19.5%
  • British Lloyds on high alert for cyberattacks
  • US bank stocks fall sharply at open
  • German market regulator monitors crisis
  • US and European officials warn of new sanctions

FRANKFURT/LONDON/NEW YORK, Feb 24 (Reuters) – Financial firms from Frankfurt to Wall Street suffered sharp falls in share prices on Thursday as they battled the impact of Russia’s invasion of Ukraine , were trying to figure out what the penalties would look like and were rushing to advise customers on how to respond.

While many bankers have downplayed Russia’s importance in their operations, it is the European Union’s fifth-largest trading partner, with a 5% share of trade, the data showed. US trade with Russia is less than 1% of its total.

Deutsche Bank (DBKGn.DE), Germany’s biggest lender, said it had contingency plans in place as US and EU officials warned of new sanctions on Moscow. Read more

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Britain’s Lloyds bank said it was on ‘high alert’ for cyberattacks, while German insurance and asset management giant Allianz (ALVG.DE) said it had frozen its exposure to Russian government bonds. Read more

While US banks were well prepared for the measures announced so far regarding Russia’s aggression against Ukraine, they feared that new measures would increase the cost and complexity of their application. Financial institutions are primarily responsible for enforcing sanctions. Read more

“Whenever there is any type of financial stress across borders, financial companies, especially banks, tend to be at the center because they have businesses in all of these areas,” said Jamie Cox, managing partner of Harris Financial Group in Richmond, Virginia. “And their impacts are felt through currency fluctuations and things like that.”

Shares of major banks plunged with the European banking sector (.SX7P) down 8% by mid-afternoon, bigger than a 3.5% drop for the Euro Stoxx index (.STOXXE) .

Major US banks, including JPMorgan Chase (JPM.N), Citigroup (CN), Goldman Sachs (GS.N) and Morgan Stanley (MS.N), lost 2-5%. This is a heavier fall than the broader market, with the S&P 500 (.SPX) down 1%.

Cox said banks were also hurt by falling US Treasury yields. Investors piled into US government debt and other safe-haven assets on Thursday after Russian forces entered neighboring Ukraine, pushing Treasury yields lower. Read more

“When Treasury yields go down, it has a deleterious effect on bank earnings,” Cox said. “So financial stocks are hit on that side.”

Indeed, some of the region’s biggest bankers have become more concerned about the potential side effects of the crisis.

The boss of HSBC (HSBA.L), one of Europe’s biggest banks, said this week that “broader contagion” for global markets was concerning, even if his direct exposure was limited. Read more

Some banks have arranged client calls with experts to analyze the situation, invitations seen by Reuters showed, with JPMorgan arranging one with Michael Singh, senior fellow at the Washington Institute for Near East Policy.

Goldman Sachs has launched a call for its private wealth clients hosted by Alex Younger, a former head of Britain’s foreign intelligence service MI6, who is now an employee of the firm.

CONTINGENCY PLANNING

European banks have the most exposure to Russia, particularly in France, Italy and Germany, far exceeding the exposure of US banks, according to data from the Bank for International Settlements.

And banks with significant operations in Russia were the hardest hit after its forces invaded Ukraine by land, air and sea, in the biggest state-on-state attack in Europe since World War II. world. Read more

Austrian Raiffeisen Bank International (RBIV.VI) lost 19.5%, while shares of Societe Generale (SOGN.PA) fell 11.2%, although the French bank said its Russian unit Rosbank continued to operate normally. Read more

Shares of UniCredit (CRDI.MI) fell 12.4% and triggered an automatic trading halt, despite the Italian bank saying its “Russia exposures are heavily hedged”.

Shares of Deutsche Bank, which like many lenders in recent years have reduced its presence in Russia as sanctions have been extended, fell more than 10.2%, the largest drop among German blue chips. .

“We have contingency plans in place,” the bank said in a statement. A spokesperson declined to give further details, but said “the risks are well contained”.

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German financial regulator BaFin said it was keeping a watchful eye on the crisis.

NEW PENALTIES

European Union leaders will impose new sanctions on Russia, freezing its assets, blocking its banks’ access to the European financial market and targeting ‘Kremlin interests’ with its ‘barbaric attack’, senior officials say . Read more

But in what will relieve European banks, the EU is unlikely at this stage to take steps to cut Russia off from the global interbank payments system SWIFT, several European sources said. Read more

British Prime Minister Boris Johnson unveiled a set of “tough” sanctions against Russia on Thursday, targeting banks, members of President Vladimir Putin’s inner circle and extremely wealthy people who enjoy the hectic life of London. L8N2UZ366

Deutsche Bank and Allianz, two of Europe’s largest financial firms and both operating in Russia, said they were ready to comply with the sanctions.

Allianz, one of the world’s largest asset managers, said the share of Russian government bonds in its portfolio was “very small” and that it had implemented a freeze on them.

RBI said this month it had earmarked 115 million euros ($129 million) as provisions for possible sanctions against Russia. As its shares fell sharply on Thursday, the bank said it was “premature to assess” the impact of the sanctions on its business.

The Austrian group said its banks in Russia and Ukraine were “well capitalized and self-financing”.

U.S. Chamber of Commerce President and CEO Suzanne Clark said in a statement that Russia’s invasion of Ukraine was a serious violation of international law.

“The business community will continue to support the administration, Congress and our allies to ensure a prompt and meaningful response to Russia’s aggression,” Clark said.

($1 = 0.8951 euros)

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Additional reporting by Alexandra Schwarz-Goerlich, Lawrence White, Valentina Za, Sujata Rao-Coverley, Kane Wu and Matt Scuffham, Devik Jain, Megan Davies; Editing by Tomasz Janowski, Jason Neely, David Goodman, Alexander Smith and Daniel Wallis

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