By Nicole Lundeen and Ulrike Dauer
VIENNA--Several European banks are warning that their 2014
results will be hurt by the Russia-Ukraine crisis, with Austria's
Raiffeisen Bank International AG becoming the latest casualty.
Shares in Raiffeisen took a nose dive Tuesday after Austria's
third-largest bank warned of a net loss this year because of
additional risk costs mainly in its Ukraine business.
Chief Executive Karl Sevelda said this year's net loss could be
up to EUR500 million ($642 million). It would be the first ever
loss in the bank's four-year history and "a consequence of the
latest developments" in the Russia-Ukraine conflict, the bank
said.
On Monday, Russian state-controlled lender VTB warned it could
report a $1.4 billion loss for 2014, also citing the Ukraine
crisis.
Russia's second-largest lender has already lost 26 billion
rubles ($672 million) because of the crisis in Ukraine, and that
figure could double for the full year, Chief Executive Andrey
Kostin said. The bank is only getting back half of its loans in
Ukraine, and its offices in Ukraine have been attacked and
vandalized.
Hungarian bank OTP's Chief Executive Sandor Csanyi recently
called his bank's presence in Ukraine problematic, especially in
the areas under pro-Russian separatist rule in the Luhansk and
Donetsk region. There have been break-ins at some of the branches
even though they were closed.
Raiffeisen's fellow Bank Austria AG, a subsidiary of Italy's
UniCredit, has had its Ukrainian business classified as for sale
since the beginning of 2014. It made a loss of EUR25 million in the
first half of the year. The bank declined to comment on business
expectations for the year.
Raiffeisen is Ukraine's fifth largest bank and has 80 branches
in east Ukraine. The Ukrainian business accounts for about 2.4% of
the bank's total assets.
Raiffeisen now forecasts 2014 risk provisions of between EUR1.50
billion and EUR1.70 billion, an increase from its previous guidance
of between EUR1.30 billion and EUR1.40 billion.
Raiffeisen, which is a key player in Central and Eastern Europe,
said it expects to return to a net profit next year, forecasting a
figure in the middle-three-digit millions.
Since the conflict between Russia and Ukraine started in late
2013, Ukraine's currency, the hryvnia, has collapsed. The economy
appears set for its largest contraction since 2009. A number of
banks have had to write down or write off assets in Ukraine.
Although Raiffeisen probably will be the hardest hit, due to its
higher exposure to Russia and Ukraine than many other European
peers, it won't be the last bank to issue a warning as the conflict
persists.
According to Barclay's analysts, European banks together have
more than EUR100 billion in exposure to loans in Russia and
Ukraine, mostly loans to companies operating there. Raiffeisen
Bank, Italy's UniCredit and France's Société Générale account for
roughly 60% of the total. European banks' exposure to Ukraine is
limited, following divestments over the past few years, Barclay's
analysts add.
Société Générale and UniCredit were not immediately available
for comment.
Germany's two biggest banks, Deutsche Bank and Commerzbank
declined to update statements from second-quarter reports ahead of
third-quarter earnings due in November.
Commerzbank's exposure to Russia amounted to EUR5.4 billion at
the end of June and the Ukraine exposure to EUR100 million. The
group expects 2014 loan-loss provisions to be "noticeably below the
2013 level," but it didn't rule out a rise in loan loss provisions
should the situation in Ukraine aggravate.
Deutsche Bank's credit exposure to Russia was EUR6.1 billion as
of June 30. Credit exposure to Ukraine was EUR500 million.
Deutsche Bank said in its second-quarter report it doesn't
expect material credit losses from the tensions between Russia and
Ukraine.
Raiffeisen is sufficiently capitalized and doesn't need a
capital increase, CEO Sevelda said. Mr. Sevelda is also relatively
sanguine about the situation in Russia pointing to the bank's
portfolio of mostly corporate loans. He also said that
international sanctions against Russia haven't had a significant
impact on the bank's business but there could be some hits if
sanctions persist.
At 1239 GMT, shares were down 10% or EUR2.06, at EUR17.71. The
shares have already lost about one-third of their value since
January.
Veronika Gulyas in Budapest also contributed to this
article.
Write to Nicole Lundeen at nicole.lundeen@wsj.com and Ulrike
Dauer at ulrike.dauer@wsj.com
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