Societe Generale does not rule out the loss of its banking assets in Russia – 03.03.2022 at 12:11


SOCIETE GENERALE DOES NOT EXCLUDE LOSS OF ITS BANKING ASSETS IN RUSSIA

PARIS/LONDON (Reuters) – Societe Generale warned on Thursday of an “extreme scenario” in which a bank could lose ownership of its banking assets in Russia, where it estimates it has a €18.6 billion risk.

The invasion of Ukraine, adopted by Moscow, provoked a volley of sanctions from the US and the European Union, in particular against Russian individuals and entities, and prompted many Western companies to withdraw from Russia.

“The Group is fully capable of absorbing the consequences of a possible extreme scenario that would affect ownership of its banking assets in Russia,” Societe Generale said in a press release.

This comment by France’s third-largest publicly listed bank illustrates the risk of Russian authorities reprisal against the financial sector, which could face a simple confiscation of its assets in Russia.

Italian bank Intesa said on Thursday it was conducting a strategic review of its presence in Russia, while US rival Citigroup warned that it could face losses of several billion dollars due to its activities in the country, where its risk reaches almost 10 billion. dollars. .

“The relatively large presence of Société Générale in Russia is clouding the outlook for 2022,” DBRS Morningstar analysts say.

Even if Societe Generale says it can handle the confiscation of its assets in Russia, the French bank should nonetheless be affected by the economic fallout from the sanctions and rising defaults from its Russian clients.

“At this stage, the group is not changing its cost of risk target and will update it if necessary when it releases its Q1 2022 results,” he said on Thursday.

Societe Generale estimates that the possible loss of its assets in Russia should cost 50 basis points to its CET1 ratio, which reached 13.7% at the end of December. Analysts at DBRS Morningstar believe that the risk is quite manageable, but it should force the bank to restructure or cut costs.

“GREAT ATTENTION” TO THE SITUATION

The risk of Societe Generale in Russia, which is 1.7% of its total volume, is divided into 15.4 billion euros registered in SG Russia, which includes Rosbank, Rosbank Insurance and ALD Automobile Russia LLC, and 3.2 billion euro mainly for offshore risks. consists of transactions created as part of the financial activities of wholesale banking and solutions for investors.

“The Group operates in Russia with the utmost care and selectivity, supporting its historical clients,” the bank said, adding that it was following developments in Ukraine and Russia “with the greatest attention.”

The Rosbank subsidiary, 99.97% owned by Societe Generale, employs about 13,000 people in Russia and has five million customers.

Asked if Societe Generale is considering exiting the Russian market or selling Rosbank, the spokesman declined to comment.

In 2021, activities in Russia accounted for 2.8% of net banking income in 2021 and 2.7% of the bank’s net income.

Societe Generale also has less than €80 million risk in Ukraine through its subsidiary ALD.

Elsewhere on the Paris Stock Exchange, Societe Generale rose 0.15% to €23.335 at 11:18 a.m., while the CAC 40 fell 0.34% at the same time.

Since the start of the Russian offensive against Ukraine on February 24, the stock market has fallen more than 24% against the fall of the European Stoxx banking index by almost 12%.

(Report by Blandine Hainault and Lawrence White in London, with input from Julien Pontus, edited by Jean-Stephan Brosse and Sophie Louet)

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