Banks in Europe suffer from wave of share sales in the face of Ukraine invasion

Most banks in Europe have little direct exposure to Russia. This, however, has not stopped investors from selling their shares since the beginning of the war in Ukraine.

Analysts say a lack of visibility into what’s next in the conflict, a jump in oil prices that could put the brakes on the European economy and indirect exposures not yet known combine to make investors wary of the continent’s banks.

“It’s a bit like the beginning of the Covid-19 crisis. Nobody has a clue what might happen next,” said Jérôme Legras, research director at Axiom Alternative Investments.

Since the start of the conflict, the Euro Stoxx banking sub-index has retreated by almost a quarter.

Société Générale, France, Italy’s UniCredit and Austria’s Raiffeisen Bank International, all with local operations in Russia, fell by up to 35%, 38% and 47%, respectively.

They reacted a little this Tuesday (8), but well below the maximums after the height of the pandemic.

Businesses in Russia represent a small share of Société Générale and UniCredit’s profits. But Raiffeisen is in a more delicate position, as about 40% of its profits come from Russia and Ukraine.

Last week, the bank suspended dividends to preserve cash, scaring investors.

Analysts, however, say the relatively small bank is safe from more serious problems as it belongs to a network of banks of the same name in Austria, which would support it financially if needed.

Others with less direct ties to Russia were not spared.

UBS said on Monday that its direct country risk exposure, including loans and derivatives, was $634 million as of December 31, a small portion of its $21 billion total in emerging markets.

Still, the bank’s stock is down nearly a fifth from its value since Feb. 23.

In this context, banks are rushing to cut ties with sanctioned banks, reassess their assets in Russia and also any exposure to the country.