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Russia’s invasion of Ukraine has no brake or expiration date and threatens to destroy the economic recovery that began after overcoming the worst moments of the pandemic. All sectors suffer the consequences: skyrocketing and homeless energy, raw materials with skyrocketing prices at origin, paralyzed tourism, the industry with a threat of paralysis due to a new lack of components, investment markets in free fall throughout the planet and banking down, with billions in loans and investments paralyzed in Russia and with multimillion-dollar losses on the stock market.
Several sectors are suffering in their prices. Airlines, hotels, tourism and banking are those that are having the worst time. Specific, the five big spanish banks (CaixaBank, Santander, BBVA, Sabadell and Bankinter) They have registered strong falls in the Ibex35 day since the Russian invasion began and they subtract almost 12% from their values, which translated into money is close to 12,500 million euros, despite the recovery of the last two sessions. These declines are due both to the slowdown in the long-awaited rate hike and to the extension of the bond purchase period. These large banks have lost almost half of what they earned in the last six months and the forecasts are that they will continue to fall, with no bottom in sight for the time being.
But not only Spanish banking suffers. So does the rest, with special emphasis on European entities, the most exposed to loans granted to Russian companies and institutions. The total exposure of the international financial sector in the country presided over by Vladimir Putin far exceeds 100,000 million euros in loans, guarantees and financial operations at the end of the third quarter of last year, according to data from the Bank for International Settlements (BIS). A figure that could be much higher if financial operations from countries with more opaque information, such as China, but with enormous financing capacity, were taken into account.
Despite the fact that many banks have significantly reduced their exposure to the Russian economy since 2014 following the invasion of Crimea by Putin’s troops, most of the big banks face the threat of sanctions and war with huge concern. In the case of Europe, the volume of credits, guarantees and loans at risk would amount to almost 50,000 million euros, although not all the countries of the continent would have the same exposure. Austria, Italy and France are the ones that are most at stake on the war board -these three only accumulate 67,000 million in operations with Russian entities and companies-, while the Spanish entities would play in loans just over 700 million euros.
The italian entities would be the ones with the most exposed financial volume in Russia, which would rise to 25,310 million eurosbeing Unicredit the one that would take the cake, with 13,725.6 million slopes. France ranks as the second largest lender in Russia, with a credit volume of 4,180 million dollars (3,775 million euros), although the real exposure of its bilateral financial operations (which also include part of guarantees and other types of loans) is 25,156 million euros. The exposure of Société Générale stands out above the rest, amounting to 14,276.8 million.
Next would be Austria, with a real financial relationship of Austrian banks with Russia above 17,500 million euros -with direct credits of 1,664 million dollars (1,537 million euros), to which should be added billions in guarantees and other financial operations and loans-. It thus joins Italy and France as one of the countries most at risk from the danger of a collapse of the Russian economy. Its most affected entity would be Raiffeisen Bank, with 14,265.1 million euros.
In the case of United Kingdom, the volume of credit operations amounted to 8,749 million dollars on the same date (7,900 million euros), to which must be added another 3,042 million in financial operations. Next would be Germany, with a financial exposure of 8,076 million; the Netherlands, with 6,588 million; Luxembourg, 3,775 million euros; Switzerland, with 3,725 million, and Germany, with 8,076 million; and Ireland, with a volume of 1,278 million euros. Many other countries also have pending banking operations with Russia. Banks in Bulgaria, Malta or Cyprus also suffer from the conflict in Ukraine. For example, the Hungarian OTP Bank, with a total exposure to Russia of 1,985.6 million, and the Cypriot RCB Bank, with 210.4 million.
Spain
As to Spain, our entities picked candles in the previous financial crisis. Since then, the large Spanish banks they have gone from having a direct credit exposure of more than 3,100 million euros in 2009 to a range between 720 and 1,000 million today, according to the different sources consulted, although the BIS limits the volume of loans granted at the end of September at the current exchange rate to around 720 million, a figure that is light years away from the most exposed entities: Italian, French and Austrian. According to Goldman Sachs, Spain would have 812 million blocked in Russia.
For US banks, the credit exposure to Russia barely exceeds 14,000 million dollars (12,821 million euros). Despite this, entities such as Goldman Sachs and JPMorgan have already begun to close their businesses in Russia. Goldman Sachs maintained its presence since 1998 in the Russian market, where it has almost a hundred employees. The bank’s exposure to Russia-related credit losses was around $650 million (€594 million) at the end of 2021, although the net credit exposure was only $293 million (€268 million).to which must be added another 414 million dollars (378 million euros) of market exposure, up to a total of 707 million dollars (646 million euros). JPMorgan it has also terminated its financial relationship with Russian entities. As confirmed in a statement, “we have been actively reducing Russian business and no new business has been sought in the country”, so its committed capital barely reaches 300 million.
And the situation may worsen if the sanctions continue to expand. European countries agreed with the US disconnect Russia from the Swift international payment systemalthough this measure will not affect all banks, but has been applied selectively to safeguard the payment of energy supply from Russian territory. It is estimated that Russia -an economy with a GDP similar to Spain’s- has saved the record figure of 620,000 million dollars, but half is now wet gunpowder due to the international financial blockade. According to calculations made by Brussels, this operation means annihilate half of the current Russian reserves –about 310,000 million dollars (279,000 million euros)– and forcing Putin to hold on to the yuan and gold he has accumulated outside of the dollar and euro – another $310 billion. But that does not guarantee that Putin and his financial system can assume his banking and credit obligations.
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