London, (Business News Report)|| The losses of European banks withdrawing from Russia, due to the Russian invasion of Ukraine at the end of last February, are still mounting.
The Russian war has sent commodity prices soaring, disrupting corporate supply chains, and disrupting the global economy.
The blow to the withdrawing European banks was heavy, with their losses so far reaching $9.6 billion.
At the forefront of European banks that made losses was Societe Generale and UniCredit. Most of the losses come from reducing the value of their operations in the region, and allocating funds as a shield against the expected economic repercussions.
European banks over the past years have benefited from Russia’s rapid growth, but the steep costs now mean that many banks are deeming it no longer worth doing business in the world’s most sanctioned country.
Many have also warned that they may have to cancel their forecasts for the year if the burden of war on the global economy worsens, as Intesa lowered its profit target for 2022 and warned that an “ultra-conservative” scenario envisaged a stronger hit.
In the face of such extreme uncertainty, senior risk officers at several major European banks are holding meetings with regulators to discuss the reliability of their models and allocations, according to people familiar with the matter.
A supervisory official, who spoke on condition of anonymity, expected banks to allocate more liquidity in the coming quarters.
Manfred Knauf, CEO of Commerzbank said that company bankruptcies are likely to rise in our markets this year on the back of higher energy prices, high inflation and supply chain disruptions.
He also explained that the German bank’s current forecast for this year takes into account “limited” economic consequences from the Ukraine war.
The deteriorating environment means European banks have been keen to highlight their resilience, with UniCredit saying on Thursday that it can absorb the macroeconomic effects of the war into its broader business thanks to “strong” capital levels, asset quality and loss-loss reserves. wise loans.
The Milan-based bank, one of the European banks with the largest presence in Russia, took a hit of 1.85 billion euros (nearly $2 billion) and is currently studying whether or not to exit Russia.
So far, most banks view the full-fledged economic crisis caused by the war as a remote risk.
Deutsche Bank said it considered translating supply chain bottlenecks into losses with “unexpected negative potential,” while Societe Generale’s central scenario revolves around a “soft landing” for the European economy, CEO Frederic Odea told Bloomberg TV.
Last month, the French bank agreed to sell its Rosbank unit to the investment company of Vladimir Potanin, Russia’s richest man, after receiving a loss of about three billion euros to get out of the country. That will reflect on second-quarter results, Odea said Thursday.