European Banks Set Aside and Write Off Loan Loss Provisions Related to Russian Assets

[Photo by Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] Italian bank UniCredit announced on the 5th (local time) that it has set aside a loan loss provision of 1.3 billion euros related to its Russian operations.

According to major foreign media on the day, UniCredit is considering withdrawing from its business in Russia and explained that the 1.3 billion euro loan loss provision is enough to cover 70% of assets directly related to Russia. UniCredit added that the size of assets directly exposed to Russia is 1.9 billion euros.

UniCredit also stated that it has cross-border financial assets worth 4.5 billion euros and derivatives related to Russian customers, and explained that if all Russia-related assets are written off, the maximum loss could reach 5.3 billion euros. The maximum loss figure disclosed by UniCredit is significantly lower than the over 7 billion euros estimated earlier in early March. UniCredit explained this is because it recently reduced the size of Russia-related assets.

UniCredit has been operating in Russia since 2005. It currently operates about 70 branches in Russia and employs several thousand people.

Despite setting aside loan loss provisions related to its Russian business on the day, UniCredit announced that it achieved a net profit of 1.2 billion euros in the first quarter of this year. The first quarter net profit increased by 48% compared to the same period last year.

UniCredit stated that despite the Ukraine war, it expects to maintain its plan to return 16 billion euros to shareholders by 2024 through share buybacks and dividends based on solid performance.

French bank Soci?t? G?n?rale also announced on the day that it additionally set aside 561 million euros in loan loss provisions in the first quarter of this year, mainly to prepare for losses due to the Ukraine war. Soci?t? G?n?rale previously announced last month that it is pursuing the sale of 99.98% of its Russian subsidiary Rosbank.

Another French bank, Cr?dit Agricole, also announced that it set aside 389 million euros in loan loss provisions related to Russian assets. Cr?dit Agricole also stated that it wrote off 195 million euros worth of assets related to the Ukrainian industry.