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Peace demonstration in front of banks:
financial institutions are hit hard by the economic consequences of the war
Photo: YANN SCHREIBER / AFP
Sell-out on the stock exchange, especially bank stocks fly en masse from the depositories of the investors.
The paper had actually developed well in the hope of rising interest rates until mid-February.
But then the Russian attack on Ukraine began.
Since then, investors have been fleeing the stock market, and their attitude towards financial institutions in particular has changed drastically.
Where there was just hope that the banks could do good business with rising interest rates and an economic comeback from the Corona crisis, pessimism now dominates: the more the West sanctions against Russia are tightened, the greater the likelihood that Western economies will also suffer (listen to our latest podcast, "The Risk of a Recession Is Significant").
In the meantime, import bans for Russian oil and gas are already being discussed.
Given the role that Russia plays as a supplier of fossil fuels, particularly for Europe, it seems clear that such an intervention could not leave the European economy unaffected.
Germany, for example, gets 50 percent of its gas from Russia alone.
For oil it is about 36 percent.
Banks are usually particularly sensitive to the ups and downs of the economy - this time it will hardly be different.
In fact, the European banking index EuroStoxx Banks has already fallen by around 40 percent in the past four weeks.
Deutsche Bank and Commerzbank, which had become real investors' favorites in the previous months, were the leading local financial institutions to record price losses to a similar extent.
On Monday of this week alone, the banking index fell by a further 10 percent at times, as much as it did last during the Corona crash in March 2020.
Investors avoid Austrian Raiffeisen Bank
Institutions that have a comparatively large exposure to Russia are hit particularly hard.
Because with these financial institutions, the specific risk of defaults in Russia is added to the general economic pessimism.
The stocks of the Austrian Raiffeisen Bank, the French Société Générale (SocGen) and the Italian HypoVereinsbank parent UniCredit posted double-digit percentage price losses on Monday at times.
Over the course of a month, the shares of these three banks have collapsed by more than 60 percent.
Background: In general, Western banks scaled back their involvement in Russia after the conflict with Ukraine first broke out in 2014.
However, this does not apply to all financial institutions.
In particular, banks in Austria, Italy and France sometimes took the opposite path: They have even expanded their business in Russia since then, as Bloomberg also reports.
The result can be found in figures from the Bank for International Settlements (BIS), from which the DZ Bank, among others, quotes in a recent study.
Accordingly, banks from Italy and France, each with more than 25 billion dollars, had by far the largest credit exposure in Russia at the end of September 2021.
It is followed by Austria with outstanding loans worth 17.5 billion dollars and the USA with 14.7 billion dollars.
German banks are in sixth place in this ranking, behind Japan ($9.6 billion), with $8.1 billion (€7.4 billion).
This coincides with information from the Association of German Banks, which put the claims of German banks, including foreign branches, against Russia at 7.5 billion euros on request.
Above all, the Austrian Raiffeisen Bank stands out among the individual institutes.
According to the bank, it employs 9,300 people in Russia and operates 132 branches there with 4.3 million customers.
In Russia alone, Raiffeisen Bank has outstanding loans of around 11.6 billion euros, and around 30 percent of the bank's total net profit comes from the country.
Relatively high exposure to Société Générale and UniCredit
In addition, there is a sizeable business run by Raiffeisen Bank in the Ukraine.
According to the institute, it employs 6,600 people there who look after around 2.9 million Ukrainian customers.
The money house puts the outstanding loans in the war-torn country at 2.2 billion euros.
So it's no wonder that investors have particularly avoided shares in the Austrian institute in recent weeks, with the price falling by more than 60 percent.
The DZ Bank writes in its study: Compared to the other banks active in Russia, the Raiffeisen Bank would suffer the most from possible burdens in the Russian business.
In a statement on its website, Raiffeisen Bank tries to reassure: "The risk arising from the current situation in Russia and Ukraine is well within the limits that ensure the group's resilience in all possible scenarios," it says.
In other words: According to its own assessment, Raiffeisen Bank would survive this crisis even in the worst conceivable case.
Société Générale, whose Moscow-based subsidiary Rosbank was the eleventh-largest institution in the country at the end of 2021, and UniCredit are also comparatively heavily involved in Russia.
For both banks, however, business in Russia is not as important as it is for Raiffeisen Bank.
The analysts at DZ Bank therefore consider possible defaults to be manageable in both cases and not a threat to the company's existence.
A view that a Frankfurt fund manager also takes in the background discussion.
Deutsche Bank employs 1,500 people in Russia
If the war in Ukraine hardly poses an existential threat to the banks that are comparatively active in the region, then the risk for German financial institutions should be even less.
Deutsche Bank and Commerzbank are among those institutions that have been in retreat in Russia since 2014 - a forward-looking strategy, as is now evident.
According to media reports, Deutsche Bank's credit exposure in Russia amounted to EUR 7.9 billion in 2012.
By the end of 2016, after the bank closed its securities department following a money laundering scandal, the volume had fallen by almost 70 percent.
In the meantime, the commitment is likely to have shrunk even further.
The bank itself announced a few days ago that it was monitoring the situation closely and would adjust its activities if necessary.
"We have significantly reduced our exposure to Russia in recent years and the risks are under control," Deutsche Bank said.
However, Deutsche Bank has not published precise figures on business in Russia.
CEO Christian Sewing
(51) should be worried about
Deutsche Bank's technology center in Russia.
The bank employs around 1,500 IT staff in the center, which is around 10 percent of the global tech workforce.
Despite the uncertainties surrounding the Russian IT sector, Deutsche Bank does not see its global business operations at risk.
That is the result of a stress test that the bank carried out, as it announced last week.
In Russia and the Ukraine, Commerzbank bakes even smaller rolls than Deutsche Bank.
A spokesman for the Frankfurt MDax company put the number of employees in Russia at 135. Commerzbank has two employees in Ukraine, the spokesman said, according to the media.
Accordingly, 40 employees work for Deutsche Bank in Ukraine.
Fear of "bad loans"
In addition, Commerzbank has already significantly reduced its commitment in Russia.
According to its own statements, the bank has a net credit risk of 1.3 billion euros in the country, which corresponds to just 0.4 percent of the total exposure.
In Ukraine, the sum is therefore less than 100 million euros.
In short, even those European banks that have a particularly strong presence in Russia and Ukraine are unlikely to be fundamentally shaken by business or loan defaults there.
The involvement of most institutes in both countries is so small anyway that there is no serious business risk from defaults.
This also applies to Deutsche Bank and Commerzbank.
However, the fact that the banks, particularly on the stock exchange, are still posting heavy losses is due to the generally gloomy prospects resulting from the development surrounding the war in Ukraine.
The sanctions imposed by the West are unlikely to fail to have an effect - not even in Western countries.
In many cases, the economy threatens to slip into recession, at least temporarily.
Financial institutions will suffer particularly badly from this.
"The proportion of bad loans at institutions is actually at a low level right now," a banking expert from Frankfurt summed it up to manager magazin.
"But if we now get into one, two or even three quarters of negative growth, i.e. into a recession, then the bad loans will rise again."
That's why the banks are currently "under great pressure" on the stock exchange.