UniCredit, BNP Paribas flag exposures to Russia

UniCredit SpA and BNP Paribas SA, which are global systemically important banks, disclosed billions of euros of exposure to Russia as many of their peers scramble to protect their businesses and plans from potential fallout from international sanctions against the country.

Italy-based UniCredit said its Russian unit had a self-funded loan position of €7.8 billion at 2021-end. Its direct exposure to the business, net of foreign exchange hedges, is about €1.9 billion, it said March 8.

UniCredit has 93 branches in Russia through its JSC UniCredit Bank unit, which is the 13th largest bank in the country by assets, according to S&P Global Market Intelligence data. It could cost the group more than €1 billion if it fully writes off its Russian business, Reuters reported, citing sources.

UniCredit's Russian client cross-border exposure is currently estimated at €4.5 billion, almost entirely to multinational corporations, the bank said, noting that nearly a third of the exposures are to the oil and gas sectors. Additionally, the group's current mark-to-market derivative exposure to Russian banks is at €300 million, net of collateral received.

In the event of an extreme scenario whereby all its maximum exposure is nonrecoverable and zeroed, UniCredit's 15.03% common equity Tier 1 ratio would fall by 200 basis points. However, the bank said it can absorb any potential impact without the ratio falling below 13%.

"Whilst we do not consider this extreme scenario as our base case, we are taking a prudent and sustainable approach to our distributions," the bank said in a statement. As long as the CET1 ratio — a key measure of financial strength — remains above 13%, UniCredit said it can proceed with the €2.58 billion share buyback it previously announced.

UniCredit's shares were up 8.96% at around midday on March 9 in Milan. Its share price has fallen 33.42% since the start of 2022 through March 8.

Since the Russia-Ukraine conflict escalated and the resulting sanctions were announced, European banks have been moving to assuage investor concerns over their businesses' resilience against any impact. The Euro STOXX Bank index has declined more than 20% in the year-to-date.

Meanwhile, France's BNP Paribas said its "limited" off- and on-balance sheet gross exposures to Russia and Ukraine amounted to €1.3 billion and €1.7 billion, respectively, as of 2021-end. Taking into consideration guarantees and collaterals, the combined net residual exposures to both countries is at approximately €500 million.

Amid the ongoing war, BNP Paribas postponed to a later date in the summer its investor day, at which it had been expected to detail the initiatives forming its 2025 strategic plan. The investor day was initially scheduled for March 14.