* Russian banks have $28 bln of exposure to Ukraine
* VTB, Sberbank suspend new loans
* Rating agencies see risks of exposure, say Russian banks
By Megan Davies
MOSCOW, Feb 26 Russia's second-largest bank VTB
has joined Sberbank in saying it would halt
new lending in Ukraine, underlining concerns over financial
risks due to political turmoil in Kiev.
Ukrainian President Viktor Yanukovich was driven from power
over the weekend after months of upheaval sparked by his
decision to spurn deals with the European Union and improve ties
with Russia. While the country has an interim leader, a new
government is yet to be formed.
"It is hard to evaluate the risk at the moment," VTB Chief
Executive Andrei Kostin said at a press conference on Wednesday.
While other foreign lenders have cut their Ukraine exposure
in the five years since the 2008 collapse of Lehman
Brothers - to 20 percent of Ukraine banking sector assets in
2012 from 40 percent in 2008, according to a Raiffeisen Research
survey - Russian banks stayed. They now account for 12 percent
of the sector..
Russia's President Vladimir Putin said that Russian banks
have an estimated $28 billion of exposure to its neighbour, with
Gazprombank, Vnesheconombank (VEB), Sberbank and VTB among the
Ratings agencies Moody's and Fitch this week cautioned of
the risks these banks faced in their loans to Ukrainian
businesses if the economy slides into recession and the currency
continues to plummet.
Kostin said the bank had stopped issuing new loans. VTB
later clarified that the bank was no longer issuing new loans to
either companies or individuals.
The move followed a similar statement from German Gref, head
of Russia's largest bank Sberbank, who said on Friday that the
bank had temporarily suspended lending, although the bank would
continue to extend credit to large enterprises whose financial
condition was sound.
Credit agencies have rung warning bells over the exposure of
Russia's banks, but they also reassured that they should be able
to cover any losses with their earnings or be propped up with
Fitch on Tuesday said that Russian banks' exposure may
"materially impact the solvency of some institutions" if
borrowers suffer as a result of economic stress. But the agency
expects the Russian government would step in, partly due to
government ownership levels in those banks.
Rival agency Moody's said earlier in the week that while
Russian bank exposure to Ukraine was significant, it remained
manageable and that Russian banks could easily absorb any credit
losses due to Ukraine's crisis from their earnings this year.
In a separate warning, the U.S. Treasury advised banks on
Tuesday to look out for potentially suspicious transfers of
financial assets by Yanukovich, who is in hiding, or members of
his inner circle.
EXPOSURE IN BILLIONS
VTB has said it has exposure to Ukraine of 20 billion
roubles ($560 million), which Kostin said was largely through
big private companies, some of which are exporters.
The bank's business in Ukraine amounts to about 2-3 percent
of total operations, Kostin said, adding the bank aimed to stay
in Ukraine for the long term.
"We hope the situation will stabilise soon," Kostin told
Sberbank had exposure of 130 billion roubles ($4 billion)
to Ukraine - or less than 1 percent of its balance sheet of $460
billion - at the end of the third quarter. Gref, of Sberbank,
said in December the bank would be able to absorb losses in
Ukraine thanks to its strong capital base.
Russia's state development bank, VEB, said in December its
own loan exposure in Ukraine was nearly $4 billion, mostly
through subsidiary Prominvestbank. It said on Monday it had no
plans to exit Prominvestbank and was providing the bank with
necessary liquidity support.
Austria's Raiffeisen Bank International, which has credit
exposure to Ukraine of 5.8 billion euros, or 3.5 percent of its
total, declined to comment on the situation in the country as it
was in such flux.
Other foreign banks in Ukraine have been taking precautions
to buffer themselves. Hungary's OTP Bank, whose subsidiary
in Ukraine is one of the bank's main avenues for growth, told
Reuters on Wednesday that it was prepared for a devaluation of
the Ukrainian hryvnia.
"OTP Bank Ukraine has consciously prepared for a devaluation
of the hryvnia," the bank said in an emailed statement. "For the
bank's open foreign currency positions and loans the course of
the exchange rate is a predictable and managed risk."
VTB's shares closed 1.3 percent lower on Wednesday,
underperforming the broad MICEX index which ended 0.6 percent