Banks caught in storm as Ukraine tensions rise

Mon Mar 3, 2014 1:57pm EST
 
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By Megan Davies

MOSCOW (Reuters) - Bankers scrambled to assess possible damage to corporate deals and tried to calm customers on Monday after Russia's military intervention in Ukraine unnerved financial markets and hit bank shares in Russia and across Europe.

Both local and foreign banks are likely to be affected if Ukraine's currency the hryvnia continues to fall, loans are not repaid or the country defaults on its sovereign debt even though Ukraine's central bank has imposed limits on the amount depositors can withdraw and is ready to provide liquidity.

"Every banker in Ukraine is trying to calm their clients and to feel safe, that's their job," Mykola Chumak, chief executive of Kiev-based private banking advisory firm IDNT, said.

"All the clients have got questions about currency rates and portfolios and they all want to look into the eyes of their banker and ask the questions directly."

Russian's Sberbank (SBER.MM: Quote), which had temporarily suspended lending in Ukraine, said it would start lending again when the financial situation there improved.

The bank said it had a strong level of liquidity in Ukraine with 1.7 billion hryvnia available and an unused line of support from its main bank of $750 million.

Shares in Sberbank and VTB (VTBR.MM: Quote), which both have assets in the country, fell 17 percent and 15 percent respectively, a heavier fall than the wider Russian stock indexes .MCX .IRTS.

"Banks tend to reflect investor sentiment to Russia more than any other stock so they are being used as a proxy," Chris Weafer, partner at advisory Macro Advisory, said of the falls in VTB and Sberbank's shares.   Continued...

 
A vendor counts Russian rouble banknotes at a market in Moscow, March 3, 2014. REUTERS/Maxim Shemetov