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Shares of European banks with links to Russia suffered the sharpest declines on the region’s exchanges Monday, as Western nations intensified financial sanctions on Moscow following the invasion of Ukraine.
Austria’s Raiffeisen Bank International (VIE:RBIV) led the declines with a drop of as much as 18% after the open in Vienna, amid investor concern that the sanctions would hit one of the lender’s most profitable units. France’s Societe Generale (OTC:SCGLY) SA and Italy’s UniCredit SpA (MI:CRDI) were both down about 10%. All three have significant businesses in Russia.
Read More: Russia Hikes Rates to Highest Since 2003, Adds Capital Controls
Lenders are waking up to a rapidly shifting scenario after the U.S. and EU ramped up their measures against Russia blocking some of the nations banks from the international SWIFT transaction messaging system and moving to target the central bank’s foreign exchange reserves. The ruble sank at the open on Monday, prompting emergency interest-rate hikes.
Raiffeisen said it couldn’t yet estimate the financial effect of sanctions as they were being expanded daily, according to a statement Monday. The lender said the measures had a “tough and far-reaching” impact on financial markets and the real economy.
The bank has about 11.6 billion euros of its loans in Russia, or 11% of its total, and makes more than 30% of its pretax profit there, according to Bloomberg Intelligence.
“The exclusion of Russian banks from international payments means that these financial institutions can no longer repay their debts to their European creditors,” VP Bank chief economist Thomas Gitzel said. “For the EU as a whole, Russia’s liabilities are manageable. The claims amount to around US$75 billion or 0.7% of the total bank claims.”
The Stoxx 600 Europe banks index was down 5.9% as of 10:08 a.m. in Paris.
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