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Deutsche Bank (DB) Limits Exposure in Russia and Ukraine
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Amid the ongoing Russia-Ukraine conflict, Deutsche Bank AG (DB - Free Report) has announced that it has limited exposure to these two countries. The company’s net loan exposure to Russia and Ukraine, as of Dec 31, 2021, was €0.6 billion ($659 million) and €42 million ($46.2 million), respectively.
Deutsche Bank has been significantly reducing its loan exposures to Russia since 2014. It has an exposure of €1.4 billion ($1.54 billion) in gross loan to Russia, which accounts for a miniscule 0.3% of its overall loan book. The company has further accelerated the process in the past two weeks owing to the conflict.
The bank has a net exposure of €0.5 billion ($550 million) to large Russian companies with material operations and cash flows outside Russia. Further, approximately € 0.1 billion ($110 million) of its exposure arises from loans to subsidiaries of large multinational companies, of which almost 50% is booked offshore.
Deutsche Bank’s derivative exposure is unaffected as well, while other exposures have no material credit risk as the bank has a net liability position. Further, offshore loans provided by the wealth management business to counterparties with a Russian connection are sufficiently collateralized and have no link with Russia.
Additionally, the company has mitigated most of the risk exposures, including the ones arising from local operations, through offshore collateral and financial guarantees. DB has also lowered its market risk exposure to both the countries.
The bank indicates that the potential closing of its information-technology hub with 1,500 employees in Russia will not affect its operations, thus containing its operational risk. The company anticipates that its other technology centers across the globe will be able to cover the Russian service center’s development capabilities.
Our Take
Deutsche Bank anticipates indirect impacts if the Russia-Ukraine conflict is prolonged. Nonetheless, given its limited exposure to Russia as well as its robust fundamentals, the extent of the exposure is likely to have little effect on its financials.
Additionally, a strong capital position and lower expenses will continue aiding the company’s profitability. Hence, investors should not worry about the geopolitical tensions weighing on Deutsche Bank’s prospects in the long haul.
Apart from DB, some of the other major global banks that have disclosed their Russian exposure include UBS Group AG (UBS - Free Report) and Citigroup, Inc (C - Free Report) .
Amid the Russia-Ukraine ongoing conflict, UBS has disclosed its $634-million exposure to Russia of the $20.9-billion total emerging market exposure (as of Dec 31, 2021) in its annual report filed with the Securities and Exchange Commission.
Citigroup has disclosed its $9.8-billion exposure to Russia in its annual report filed with the Securities and Exchange Commission on Feb 28, 2022.
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Deutsche Bank (DB) Limits Exposure in Russia and Ukraine
Amid the ongoing Russia-Ukraine conflict, Deutsche Bank AG (DB - Free Report) has announced that it has limited exposure to these two countries. The company’s net loan exposure to Russia and Ukraine, as of Dec 31, 2021, was €0.6 billion ($659 million) and €42 million ($46.2 million), respectively.
Deutsche Bank has been significantly reducing its loan exposures to Russia since 2014. It has an exposure of €1.4 billion ($1.54 billion) in gross loan to Russia, which accounts for a miniscule 0.3% of its overall loan book. The company has further accelerated the process in the past two weeks owing to the conflict.
The bank has a net exposure of €0.5 billion ($550 million) to large Russian companies with material operations and cash flows outside Russia. Further, approximately € 0.1 billion ($110 million) of its exposure arises from loans to subsidiaries of large multinational companies, of which almost 50% is booked offshore.
Deutsche Bank’s derivative exposure is unaffected as well, while other exposures have no material credit risk as the bank has a net liability position. Further, offshore loans provided by the wealth management business to counterparties with a Russian connection are sufficiently collateralized and have no link with Russia.
Additionally, the company has mitigated most of the risk exposures, including the ones arising from local operations, through offshore collateral and financial guarantees. DB has also lowered its market risk exposure to both the countries.
The bank indicates that the potential closing of its information-technology hub with 1,500 employees in Russia will not affect its operations, thus containing its operational risk. The company anticipates that its other technology centers across the globe will be able to cover the Russian service center’s development capabilities.
Our Take
Deutsche Bank anticipates indirect impacts if the Russia-Ukraine conflict is prolonged. Nonetheless, given its limited exposure to Russia as well as its robust fundamentals, the extent of the exposure is likely to have little effect on its financials.
Additionally, a strong capital position and lower expenses will continue aiding the company’s profitability. Hence, investors should not worry about the geopolitical tensions weighing on Deutsche Bank’s prospects in the long haul.
Shares of DB, which currently carries Zacks Rank #4 (Sell), have lost 13.3% in the past year, underperforming the industry’s fall of 2.8%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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Apart from DB, some of the other major global banks that have disclosed their Russian exposure include UBS Group AG (UBS - Free Report) and Citigroup, Inc (C - Free Report) .
Amid the Russia-Ukraine ongoing conflict, UBS has disclosed its $634-million exposure to Russia of the $20.9-billion total emerging market exposure (as of Dec 31, 2021) in its annual report filed with the Securities and Exchange Commission.
Citigroup has disclosed its $9.8-billion exposure to Russia in its annual report filed with the Securities and Exchange Commission on Feb 28, 2022.