Global finance grapples with Ukraine crisis as shares slump

FRANKFURT/LONDON/NEW YORK: Financial firms from Frankfurt to Wall Street suffered heavy share price falls on Thursday as they grappled with the impact of shockwaves from Russia’s invasion of Ukraine.

Deutsche Bank, Germany’s largest lender, said it had contingency plans in place as U.S. and European officials warned of further sanctions on Moscow.

British bank Lloyds said it was on “heightened alert” for cyberattacks, while German insurance and asset management giant Allianz said that it had frozen its Russian government bond exposure.

Shares of leading banks plunged after Russian forces moved into neighbouring Ukraine on Thursday, with the European banking sector down 7.7% mid-afternoon, steeper than a 4.6% fall for the Euro Stoxx index.

Top U.S. banks, including JPMorgan Chase, Citigroup , Goldman Sachs, and Morgan Stanley, shed 3-4.5% at the start of trading. That was a heavier fall than the broader market, with the S&P 500 down 2.6%.

European banks are most exposed to Russia, especially in France, Italy and Spain, far outstripping U.S. banks’ exposure, data from the Bank for International Settlements shows.

And those banks with significant operations in Russia were hardest hit after its forces invaded Ukraine by land, air and sea, with the biggest attack by one state against another in Europe since World War Two.

Austria’s Raiffeisen Bank International was down 19.5%, while shares in Societe Generale lost 11.2%, although the French bank it said its Russian unit Rosbank continued to operate normally. UniCredit shares fell 12.4% and triggered an automatic trading suspension, although the Italian bank said its Russia “exposures are highly covered”.

German financial regulator BaFin said it was keeping a watchful eye on the crisis.

Some banks organised calls for clients with experts to explain the situation, invitations seen by Reuters showed, with JPMorgan scheduling one with Michael Singh, senior fellow at the Washington Institute for Near East Policy.

Goldman Sachs ran a call for its private wealth clients hosted by Alex Younger, a former chief of British foreign intelligence service MI6, who is now an employee of the firm.

European Union leaders will impose new sanctions on Russia, freezing its assets, halting access of its banks to the European financial market and targeting “Kremlin interests” over its “barbaric attack”, senior officials said.

But in what will be a relief to Europe’s banks, the EU is unlikely at this stage to take steps to cut off Russia from the SWIFT global interbank payments system, several EU sources said.

Both Deutsche Bank and Allianz, two of Europe’s most important financial businesses and both with operations in Russia, said they were ready to comply with sanctions.

Allianz, one of the world’s biggest asset managers, said that the share of Russian government bonds in its portfolio was “very low” and that it had implemented a freeze on them. Shares in Deutsche Bank, which like many lenders in recent years has reduced its presence in Russia as sanctions have expanded, were down more than 10.2%, the biggest decline among German blue chips.

“We have contingency plans in place,” it said in a statement. A spokesperson declined to elaborate, but said “risks are well contained”.

Lloyds Chief Executive Charlie Nunn said that the British bank was on “heightened alert ... internally around our cyber risk controls”, adding that preparation for potential cyberattacks was discussed in a meeting between the government and banking industry leaders on Wednesday.

Lloyds has been on heightened alert for several months, Nunn told reporters. RBI, which this month said it had earmarked 115 million euros ($129 million) in provisions for possible sanctions on Russia, said on Thursday, as its shares dropped sharply, that it was “premature to assess” the impact on its business.