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

Unpaid Kurdish Fighters Sign of Economic Woes

Sharp cuts in Kurdistan's budget by Baghdad, falling oil revenue, coping with refugees, inflated public sector have hit regional economy hard More

Koreas Exchange List of Envoys for Family Reunion Talks

Officials will discuss date, venue and number of participants for reunion; Seoul hopes to hold event late this month More

China Targets 197 in Online Speech Crackdown

Nearly 200 punished for 'spreading rumors' online in ongoing crackdown on free speech More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Calais School Offers Another Face of Europe’s Migrant Crisisi
X
Lisa Bryant
September 02, 2015 6:19 PM
Europe is facing mounting criticism over how it’s handling its biggest migration crisis since World War II. But not all Europeans believe building walls or passing repressive policies are the answer. A school for migrants in the French port city of Calais, is opening doors and building bonds across nationalities. VOA's Lisa Bryant reports.
Video

Video Calais School Offers Another Face of Europe’s Migrant Crisis

Europe is facing mounting criticism over how it’s handling its biggest migration crisis since World War II. But not all Europeans believe building walls or passing repressive policies are the answer. A school for migrants in the French port city of Calais, is opening doors and building bonds across nationalities. VOA's Lisa Bryant reports.
Video

Video Russia-Japan Relations Cool as Putin Visits China for WWII Anniversary

Russian President Vladimir Putin is in Beijing for commemorations of the 70th anniversary of China's WWII victory over Japan. Putin is expected to visit Japan later this year, but tensions between Tokyo and Moscow over islands disputed since the war, and sanctions over Ukraine, could pour cold water on the plan. VOA's Daniel Schearf reports.
Video

Video Kurdish Fighters on IS Frontline Ready for Offensive

Finger on the trigger, the Kurdish Peshmerga soldier stared across the dust at a village taken over by Islamic State extremists. The Kurdistan’s Khazir frontline, just 45 minutes from the Islamic State stronghold of Mosul. And at this point, the militants were less than two kilometers away. VOA's Sharon Behn reports.
Video

Video Yemen ‘on Brink of Disaster’ as Medical Shortages Soar

Aid agencies warn Yemen is on the brink of humanitarian disaster – with up to half a million children facing severe malnutrition, and hospitals running out of basic medicines. There are fears Yemen's civil war could escalate as the coalition led by Saudi Arabia tries to drive back Houthi rebels, who seized control of much of the country earlier this year. Henry Ridgwell reports.
Video

Video Apps Helping Kenyan Businesses Stay Ahead of Counterfeiters

Counterfeit goods in Kenya cost the government as much as $1 billion each year in lost tax revenues. The fake goods also hurt entrepreneurs who find it hard to carve out a niche in the market and retain customers. But as Lenny Ruvaga reports from Nairobi, information technology is being used to try to beat the problem.
Video

Video Nobel Prize Winner Malala Talks to VOA

Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video War, Drought Threaten Iraq's Marshlands

Iraq's southern wetlands are in crisis. These areas are the spawning ground for Gulf fisheries, a resting place for migrating wildfowl, and source of livelihood for fishermen and herders. Faith Lapidus has more.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Rebuilding New Orleans' Music Scene

Ten years after Hurricane Katrina inundated New Orleans, threatening to wash away its vibrant musical heritage along with its neighborhoods, the beat goes on. As Bronwyn Benito and Faith Lapidus report, a Musicians' Village is preserving the city's unique sound.
Video

Video In Russia, Auto Industry in Tailspin

Industry insiders say country relies too heavily on imports as inflation cuts too many consumers out of the market. Daniel Schearf has more from Moscow.
Video

Video Scientist Calls Use of Fetal Tissue in Medical Research Essential

An anti-abortion group responsible for secret recordings of workers at a women's health care organization claims the workers shown are offering baby parts for sale, a charge the organization strongly denies. While the selling of fetal tissue is against the law in the United States, abortion and the use of donated fetal tissue for medical research are both legal. VOA’s Julie Taboh reports.
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.

VOA Blogs

World Currencies

EUR
USD
0.8905
JPY
USD
120.20
GBP
USD
0.6541
CAD
USD
1.3262
INR
USD
66.242

Rates may not be current.