By Tom Sims and Carolyn Cohn
FRANKFURT/LONDON (Reuters) – European banks traded lower on Wednesday after two days of steep losses to hit their lowest in nearly 11-months as the crisis in Ukraine drags on, and after the European arm of Russia’s Sberbank was forced to close.
An index of leading European bank stocks was down 0.6% on Wednesday, after dropping 5.6% on Tuesday and 4.5% on Monday. It hit its lowest level since April, down 27% from last month’s highs.
Wednesday’s trading comes against a backdrop of Russia showing no intention of stopping its assault, as U.S. President Joe Biden warned Vladimir Putin that the Russian leader “has no idea what’s coming”. Russia calls its actions in Ukraine a “special operation”.
Among the heaviest hit bank shares so far this week is Austria’s Raiffeisen Bank International, which is also looking into leaving Russia, two people with knowledge of the matter told Reuters, a move that would make it the first European bank to do so since Moscow’s invasion of Ukraine.
Raiffeisen shares, which are half the value of a month ago, were down 5.2%.
Some officials are trying to reassure markets. The capital position of Hungary’s OTP Bank, central Europe’s largest independent lender, is excellent and the bank can withstand further possible market shocks in Russia and Ukraine, Hungary’s central bank said in an emailed reply to Reuters.
ING was flat, climbing off a 4.8% drop at the open, and Societe Generale was down 1.1%. Both have a presence in Russia.
RUN ON DEPOSITS
Overnight, the European arm of Sberbank, Russia’s biggest lender, was closed by order of the European Central Bank, which had warned it faced failure due to a run on deposits after Russia invaded Ukraine, Austria’s Financial Market Authority said.
Sberbank, which reported record profits in 2021, said that it was leaving the European market as its subsidiaries there faced large cash outflows and threats to the safety of employees and property.
Sberbank operated in Austria, Croatia, Germany and Hungary, among other nations, and had European assets worth 13 billion euros ($14.41 billion) on Dec. 31, 2020.
On Tuesday, Russia said it was placing temporary restrictions on foreigners seeking to exit Russia assets, as it tried to stem an investor retreat driven by crippling Western sanctions imposed over the invasion of Ukraine.
But investors are further shedding assets. Aviva’s fund management unit will divest its small exposure to Russia “as soon as we practically can,” chief executive Amanda Blanc said on Wednesday.
Financial firms are scrambling to keep up with the situation.
France’s BNP Paribas said it was working to maintain its activities as much as possible at its Ukraine arm Ukrsibbank, which has close to 5,000 employees.
A task force at Germany’s Commerzbank, which has a subsidiary in Russia, is meeting multiple times a day, a board member has said.
Aki Hussain, CEO of Hiscox, said the Lloyd’s of London insurer provided cover for international businesses in Ukraine.
“We insure those offices and some of the people there and we’ve been working closely with our clients for the last eight weeks and effectively – to the extent they want – we’ve been helping them leave the country and evacuate their staff.”
($1 = 0.9022 euros)
(The story corrects to remove extraneous word from headline.)
(Additional reporting by Gergely Szakacs and Zuzanna Szymanska; Editing by Paul Carrel and Tomasz Janowski)
