SocGen warns it could be stripped of Russian business

SocGen warns it could be stripped of Russian business

The logo of French bank Societe Generale is seen outside a bank office in Nantes, France, February 4, 2022. REUTERS/Stephane Mahe

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  • French bank has $20 billion exposure to Russia
  • The bank could absorb the consequences of an “extreme scenario” in Russia
  • As Sanctions Hit, Banks Consider Consequences in Russia

PARIS/LONDON, March 3 (Reuters) – Societe Generale (SOGN.PA) has warned it could be stripped of its business in Russia, where it has more than 18 billion euros ($19.97 billion) in exposure, in one of the most stark indications yet by a global bank of the potential impact of the fallout from Russia’s invasion of Ukraine on Western banks.

Russia’s invasion of Ukraine triggered a series of financial sanctions from the United States, Europe and Britain aimed at squeezing its economy, and Western companies decided to sell active in Russia.

“The group has more than enough leeway to absorb the consequences of a potential extreme scenario, in which the group would be stripped of ownership rights to its banking assets in Russia,” the bank said Thursday.

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Comments from France’s third-largest listed bank show how banks and other financial firms risk retaliation for the moves, including the possibility that Russia could simply seize their assets in the country.

“The group’s relatively high exposure to Russia casts a shadow over its 2022 outlook,” DBRS Morningstar analysts said Thursday.

Even without the extreme threat of seizure of its assets, the French bank stands to suffer the economic impact of sanctions and rising defaults as Russian borrowers struggle.

A delisting in Russia could lead to a 30 basis point drop in the lender’s 13.7% core capital ratio, DBRS Morningstar analysts said, manageable but likely to put pressure on it to restructure or cut costs elsewhere, as it did after reporting a loss in 2020.

The French bank said its exposure was 15.4 billion euros within its Russian business SG Russia and 3.2 billion euros outside Russia.

The bank “continues detailed monitoring of the situation in Ukraine and Russia,” she said.

“Societe Generale rigorously respects the legislation in force and diligently applies all the necessary measures to strictly comply with international sanctions”, added the bank.

Most of this exposure comes from its 99.97% stake in Rosbank, which has about 13,000 employees and 5 million customers.

Asked about SocGen’s intention to exit the Russian market or sell its Russian unit Rosbank, a spokesperson said the group had no comment on the matter.

Societe Generale shares rose 2% on Thursday, after falling more than 20% this year after the war in Ukraine triggered international sanctions and hit banks like the French lender that are active in Russia. Read more

($1 = 0.9013 euros)

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Reporting by Tassilo Hummel and Lawrence White, additional reporting by Julien Ponthus Editing by John O’Donnell and Jane Merriman

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