Fitch warns over Russian state banks' Ukraine exposure

25th February 2014, Comments 0 comments

Russian state-owned banks are facing risks over tens of billions of dollars of exposure to crisis-hit Ukraine, which may affect the solvency of some institutions, ratings agency Fitch warned on Tuesday.

Fitch said that Russian state-owned banks are holding the bulk of Russian banks' total exposure to Ukraine of an estimated $28 billion, with the risks involving loans to local companies and businessmen who borrowed funds to acquire Ukrainian assets, it said.

It said the biggest exposures belong to Russia's state development bank Vnesheconombank whose exposure relative to its total equity is a colossal 74 percent, with risks relating to its Ukrainian subsidiary and loans booked on the parent bank's books.

Next comes Gazprombank -- the bank of the state owned gas giant -- with an exposure of 40 percent relative to equity. Gazprombank has no Ukrainian subsidiary but has extended a loan to Ukraine's state energy company Naftogaz.

Russian state-owned bank VTB has an exposure-to-equity-ratio to Ukraine of at least 14 percent and Russia's biggest bank, state owned Sberbank, has an exposure of eight percent.

The only private bank mentioned by Fitch, Alfa Bank, has a relatively low exposure of three percent relative to its equity.

"Russian banks' significant exposures to Ukraine may materially impact the solvency of some institutions if borrowers suffer as a result of the heightened political and economic stress," Fitch said.

It said the situation could be aggravated by a new recession, challenges to ownership of pledged assets or a further devaluation of the hryvnia.

Ukraine's new authorities have warned that the country is in dire need of international financial help following the sudden ousting of president Viktor Yanukovych last week.

Interim finance minister Yuriy Kolobov has said that the "planned volume of macroeconomic assistance for Ukraine may reach around $35 billion (25 billion euros)" by the end of next year.

Yanukovych late last year had agreed a $15-billion bailout deal from Russia with President Vladimir Putin.

Russia disbursed the first tranche of $3 billion but the fate of the rest of the loan is uncertain amid an icy start to relations between Moscow and the pro-Europe new Ukrainian authorities.

© 2014 AFP

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