The need to write down assets as well as set aside cash to protect against the expected economic ramifications of anti-Russian sanctions has resulted in billions of euros in losses for European banks.
Lenders have so far taken a hit of around $9.6 billion, led by Societe Generale and UniCredit. ING and Intesa Sanpaolo said exposure to Russia reduced their combined first-quarter net profit by almost $2 billion.
Several lenders said their outlook for the year would be dashed if the drag of the Russian-Ukrainian conflict on the global economy worsens. Intesa has reportedly cut its 2022 profit target, warning that a “very conservative” scenario predicts an even harder blow.
Faced with this extreme uncertainty, the risk directors of several European banking majors are holding meetings with regulators and each other to assess the reliability of their models and their provisioning, people familiar with the matter told Bloomberg.
“Business bankruptcies in our markets are likely to increase” in 2022 amid soaring energy prices, high inflation and supply chain disruptions, according to Commerzbank chief executive Manfred Knof, as quoted by the agency.
UniCredit said it could absorb the latest macroeconomic ripple effects in its broader business through its “strong” capital levels, asset quality and prudent loan loss reserves. One of Europe’s banks with the biggest presence in Russia, UniCredit has reportedly suffered a $2 billion hit as it considers an exit strategy.
Meanwhile, French lender Societe Generale is expected to suffer a loss of 3 billion euros following the sale of its stake in Russia’s Rosbank.
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