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UniCredit is urgently reviewing its Russian business and could decide on a costly exit of the country after Russia’s incursion into Ukraine.
Growing lists of financial firms are looking to exit Russia, with Deutsche Bank, Goldman Sachs and JPMorgan Chase winding down business there.
Unicredit Chief Executive Andrea Orcel said on Tuesday the economic environment had changed because of the Ukraine crisis and the bank was now assuming there would be stagflation – or a combination of low growth and high inflation.
Italy’s second-biggest bank last week said a full write-off of its Russian business, including cross-border exposure, would cost around $8.1 billion, leaving its plans to distribute capital to shareholders hanging by a thread.
Its shares fell 3.2 per cent, and an index of European banking stocks was down 1.8 per cent.
Russia has $117 million in payments due on Wednesday on two dollar-denominated Eurobonds. Its finance ministry has said it will make the payments in roubles if sanctions prevent it from paying in dollars.
However, the payment due on Wednesday has to be made in dollars and using other currencies could constitute a default.
Russia’s economic crisis is likely to cause credit to go unpaid but euro zone banks’ exposure to the country is contained, the European Central Bank’s top supervisor Andrea Enria said, adding no blanket ban on dividends was on the cards.
Western governments continue to ratchet up the pressure as three European prime ministers rode a train for Kyiv on Tuesday, the first visit by foreign leaders to the Ukrainian capital since Russia launched its invasion.
The European Union has banned top credit rating firms from rating Russia’s sovereign debt and the country’s companies as part of its latest sanctions package, the European Commission said.
Britain imposed sanctions on hundreds of Russian individuals and entities, banned the export of luxury goods to Russia and said it had stopped all government-backed export finance to Russia and Belarus.
Commercial insurance market Lloyd’s of London said it was looking to apply sanctions pressure on Russia through the cyber, aerospace and political risk insurance markets.
Sources: TRT World, Reuters
