News / Economy

Banks Caught in Storm as Ukraine Tensions Rise

FILE - A display shows currency exchange rates in central Kyiv, Ukraine, Feb. 4, 2014.
FILE - A display shows currency exchange rates in central Kyiv, Ukraine, Feb. 4, 2014.
Reuters
Bankers scrambled to assess possible damage to corporate deals and tried to calm customers on Monday after Russia's military intervention in Ukraine unnerved financial markets and hit bank shares in Russia and across Europe.

Both local and foreign banks are likely to be affected if Ukraine's currency the hryvnia continues to fall, loans are not repaid or the country defaults on its sovereign debt even though Ukraine's central bank has imposed limits on the amount depositors can withdraw and is ready to provide liquidity.

"Every banker in Ukraine is trying to calm their clients and to feel safe, that's their job," Mykola Chumak, chief executive of Kyiv-based private banking advisory firm IDNT, said. "All the clients have got questions about currency rates and portfolios and they all want to look into the eyes of their banker and ask the questions directly."

Russian's Sberbank, which had temporarily suspended lending in Ukraine, said it would start lending again when the financial situation there improved.

The bank said it had a strong level of liquidity in Ukraine with 1.7 billion hryvnia available and an unused line of support from its main bank of $750 million.

Shares in Sberbank and VTB, which both have assets in the country, fell 17 percent and 15 percent respectively, a heavier fall than the wider Russian stock indexes.

"Banks tend to reflect investor sentiment to Russia more than any other stock so they are being used as a proxy," Chris Weafer, partner at advisory Macro Advisory, said of the falls in VTB and Sberbank's shares.

Weafer said concern over the ruble weakness was due to the risk it could encourage people to take money out of local currency and shrink banks' deposit bases. A weaker ruble also leads to an erosion of consumer confidence which can lead to higher defaults among businesses, Weafer said.

Ukraine's hryvnia has fallen to a record low while the ruble has dropped 2 percent, although cushioned by central bank intervention.

"The [Russian banks] cannot pull out [of Ukraine]," Alexander Danilov, analyst at Fitch, said. "The only thing which they can do - which they've already done - is stop issuing new loans there," he said. "And now they can only sit and wait and try and recover what they have and hope the situation gets back to normal."

The crisis could have an impact for investment banks too as they might have to consider pulling upcoming stock market listings due to market turbulence. German retailer Metro's plan to list a stake in its Russian wholesale business is under threat, sources said.

Bankers are also trying to assess the impact of the crisis on billions of dollars of Russian loans in the pipeline and whether there will be contagion in the wider syndicated loan market.

Depositor Limits

For Ukraine's banks, the main risks are a sovereign default or a prolonged slide in the hryvnia. That could hit their capital levels, Elena Redko, analyst at Moody's told Reuters.

A big part of the banks' foreign exchange loans are to firms with no with export revenues or foreign currency revenues, making them susceptible to a fall in the hryvnia.

"So far, the National Bank of Ukraine has acted proactively to monitor the banking system liquidity," Redko said.

The central bank has already acted to stem potential foreign currency withdrawals.

Local bank Privatbank and the Ukrainian arm of Italy's biggest bank by assets, UniCredit, also have limits on withdrawals.

The largest banks with Ukrainian government debt exposure are state banks Savings Bank of Ukraine, Ukreximbank and Ukrgazbank plus privately-held Delta, according to Moody's.

Savings Bank of Ukraine said its press service was not accepting calls and did not respond to email. Ukreximbank, Ukrgazbank and Delta Bank did not have working press office numbers and did not respond to requests for comment.

Ukraine's new central bank head Stepan Kubiv said last week that the bank was ready to provide liquidity, including cash to banks, according to a statement on the bank's website.

"We are in control of the situation in the banking sector," Kubiv said.

Russian Exposure

Russian banks, with an estimated $28 billion of assets in Ukraine spread between Sberbank, VTB, Gazprombank and Vnesheconombank (VEB), have a lot at stake.

Sberbank and VTB have pledged long-term commitment although they are halting lending. VTB has said it has exposure to Ukraine of 20 billion rubles ($560 million), largely through private companies, and that its business there amounts to about 2-3 percent of total operations. VTB's CEO Andrei Kostin said on Wednesday the bank aimed to stay in Ukraine for the long term.

On Monday it said it had no further comment on Ukraine.

Sberbank's CEO German Gref said two weeks ago that the bank had no intention of leaving the market. Sberbank had exposure of 130 billion rubles ($4 billion) to Ukraine - or less than 1 percent of its balance sheet.

State development bank VEB said in December its loan exposure in Ukraine was nearly $4 billion, mostly through unit Prominvestbank. It said last week it had no plans to exit and declined further comment on Monday.

Ekaterina Trofimova, a Gazprombank board member, said on Monday the bank was taking all necessary steps in Ukraine to minimize its risks.

Other foreign banks in Ukraine have to decide whether to cut losses and go or stay put to grab market share.

Raiffeisen Bank International said on Monday it has frozen the sale of its Ukrainian arm due to the uncertain situation in the country.

You May Like

Hostage Crisis Could Divide Japan Over Plans to Boost Military

Japanese Chief Cabinet Secretary Yoshihide Suga said Monday the government is working closely with the Jordanian government to secure the release of remaining Japanese hostage Kenji Goto More

Video Brussels Shaken as New Greek Leader Challenges Europe’s Austerity Drive

Country's youngest ever PM Alexis Tsipras, 40, sworn in Monday and says he will restore dignity to Greece by ending spending cuts More

Multimedia National Geographic Photo Camps Empower Youth

Annual mentoring program's mission is to give young people a voice to tell their own stories through photography More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Obama Urges Closer Economic Ties During Historic India Visiti
X
Aru Pande
January 26, 2015 9:33 PM
U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video Obama Urges Closer Economic Ties During Historic India Visit

U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video US, EU Threaten New Russia Sanctions Over Ukraine

U.S. President Barack Obama has blamed Russia for an attack by Ukrainian separatists that left dozens dead in the port of Mariupol and cast further doubt on the viability of last year’s cease-fire with the Kyiv government. VOA’s Michael Bowman reports from Washington.
Video

Video White House Grapples With Yemen Counterterrorism Strategy

Reports say the U.S. has carried out a drone strike on suspected militants in Yemen, the first after President Barack Obama offered reassurances the U.S. is continuing its counterterrorism operations in the country. The future of those operations has been in question following the collapse last week of Yemen’s government. VOA White House correspondent Luis Ramirez reports.
Video

Video Kerry Warns Against Violence in Nigeria Election

US Secretary of State John Kerry visited Nigeria Sunday in a show of the level of concern within the U.S. and the international community over next month’s presidential election. Chris Stein reports.
Video

Video Zoo Animals Show Their Artistic Sides

The pursuit of happiness is so important, America's founding fathers put it in the Declaration of Independence. Any zookeeper will tell you animals need enrichment, just like humans do. So painting, and even music, are part of the Smithsonian National Zoo's program to keep the animals happy. VOA’s June Soh met some animal artists at the zoo in Washington. Faith Lapidus narrates.
Video

Video Worldwide Photo Workshops Empower Youth

Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video Saudi, Yemen Developments Are Sudden Complications for Obama

The death of Saudi Arabia's King Abdullah and the collapse of Yemen’s government have cast further uncertainty on U.S. efforts to fight militants in the Middle East and also contain Iran’s influence in the region. VOA White House correspondent Luis Ramirez reports on the new complications facing the Obama administration and its Middle East policy.
Video

Video Progress, Some Areas of Disagreement in Cuba Talks

U.S. and Cuban officials are reporting progress from initial talks in Havana on re-establishing diplomatic ties. U.S. Assistant Secretary of State (for Western Hemisphere Affairs) Roberta Jacobson said while there was agreement on a broad range of issues, there also are some “profound disagreements” between Washington and Havana. VOA State Department correspondent Pam Dockins has the story.
Video

Video US, Japan Offer Lessons as Eurozone Launches Huge Stimulus

The Euro currency has fallen sharply after the European Central Bank announced a bigger-than-expected $67 billion-a-month quantitative easing program Thursday - commonly seen as a form of printing new money. Henry Ridgwell reports for VOA from London on whether the move might rescue the eurozone economy -- and what lessons have been learned from similar programs around the world.
Video

Video Nigerian Elections Pose Concern of Potential Conflict in 'Middle Belt'

Nigeria’s north-central state of Kaduna has long been the site of fighting between Muslims and Christians as well as between people of different ethnic groups. As the February elections approach, community and religious leaders are making plans they hope will keep the streets calm after results are announced. Chris Stein reports from the state capital, Kaduna.
Video

Video As Viewership Drops, Obama Puts His Message on YouTube

Ratings reports show President Obama’s State of the Union address this week drew the lowest number of viewers for this annual speech in 15 years. White House officials anticipated this, and the president has decided to take a non-traditional approach to getting his message out. VOA White House correspondent Luis Ramirez reports.
Video

Video S. Korean Businesses Want to End Trade Restrictions With North

Business leaders in South Korea are calling for President Park Geun-hye to ease trade restrictions with North Korea that were put in place in 2010 after the sinking of a South Korean warship.Pro-business groups argue that expanding trade and investment is not only good for business, it is also good for long-term regional peace and security. VOA’s Brian Padden reports.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid

World Currencies

EUR
USD
0.8893
JPY
USD
118.31
GBP
USD
0.6660
CAD
USD
1.2459
INR
USD
61.427

Rates may not be current.