SOCIETE GENERALE DOES NOT EXCLUDE LOSING ITS BANKING ASSETS IN RUSSIA
PARIS/LONDON (Archyde.com) – Societe Generale warned on Thursday of an “extreme scenario” in which the bank could lose ownership of its banking assets in Russia where it estimates its exposure at 18.6 billion euros.
The invasion of Ukraine decided by Moscow provoked a salvo of sanctions from the United States and the European Union, in particular against Russian personalities 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 which would affect the property rights over its banking assets in Russia,” Societe Generale said in a press release.
This comment from France’s third-largest listed bank illustrates the risk of reprisals from the Russian authorities facing the financial sector, which could see its assets in Russia purely and simply confiscated.
The Italian bank Intesa said on Thursday it was conducting a strategic review of its presence in Russia and its American competitor Citigroup warned for its part that it could face several billion dollars in losses on its activities in the country where its exposure reaches nearly of $10 billion.
“Société Générale’s relatively large exposure to Russia casts a shadow over the outlook for 2022,” DBRS Morningstar analysts said in a note.
Even if Societe Generale says it is able to cope with a seizure of its assets in Russia, the French bank should nevertheless be affected by the economic impact of the sanctions and an increase in defaults by its Russian customers.
“At this stage, the group is not changing its cost of risk target and will update it, if necessary, when it publishes its results for the first quarter of 2022,” 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. For DBRS Morningstar analysts, the risk is manageable but it should put pressure on the bank to restructure or cut costs.
“GREAT ATTENTION” TO THE SITUATION
Societe Generale’s exposure to Russia, which represents 1.7% of its total exposure, is divided between 15.4 billion euros recorded in SG Russia – which includes the companies Rosbank, Rosbank Insurance and ALD automotive OOO Russia – and 3.2 billion euros from off-shore exposures mainly made up of operations set up as part of the financing activities of wholesale banking and investor solutions.
“The group carries out its activities in Russia with the greatest caution and selectivity, supporting its historical customers,” the bank said, adding that it was following “with the greatest attention” the development of the situation in Ukraine and Russia. .
The Rosbank subsidiary, 99.97% owned by Societe Generale, employs around 13,000 people in Russia and has five million customers.
Asked whether Societe Generale was considering exiting the Russian market or selling Rosbank, a spokesperson declined to comment on the matter.
In 2021, activities located in Russia represented 2.8% of net banking income in 2021 and 2.7% of the bank’s net income.
Societe Generale also has an exposure of less than 80 million euros in Ukraine via its subsidiary ALD.
On the Paris Bourse, the Societe Generale share gained 0.15% to 23.335 euros at 11:18 a.m. when the CAC 40 fell by 0.34% at the same time.
Since the launch of the Russian offensive in Ukraine on February 24, the stock market has fallen by more than 24% against a decline of nearly 12% for the European Stoxx banking index.
(Report Blandine Hénault and Laurence White in London, with the contribution of Julien Ponthus, edited by Jean-Stéphane Brosse and Sophie Louet)