UniCredit would take 1 billion euro hit from Russia business write-off-sources

MILAN (Reuters) – A full write-off of UniCredit’s Russian business would cost the Italian bank just over 1 billion euros ($1.1 billion) and shave 35 basis points off its best-quality capital ratio, two people close to the matter said.

UniCredit, Italy’s No.2 bank, has 2.3 billion euros in equity tied up in its Russian unit, or 3.7% of the group’s total.

However, a full write-off would also lower the bank’s risk-weighted assets, mitigating in part the hit to its capital ratios.

UniCredit’s Russian arm, AO UniCredit Bank, is the country’s 14th largest bank.

UniCredit, which has lost nearly a quarter of its value since Russia invaded Ukraine last week, also has cross-border exposure to the country.

Its overall ‘exposure at default’ to Russia was 14.2 billion euros as of mid-2021. That includes 8 billion euros in loans extended by the Russian arm and locally funded.

The rest comprises off-balance sheet items and cross-border loans mainly granted by UniCredit SpA towards large corporates outside of Russia.

In a comment on Wednesday about risks Western banks face from their Russian exposure, Fitch Ratings said that even a full-write off of investments UniCredit and Societe Generale have in their local subsidiaries “would have a fairly moderate impact on capital at group level”.

Societe Generale owns Russian bank Rosbank.

UniCredit’s CET1 capital stood at 15.03% of its risk weighted assets at the end of December, well above a 9.03% minimum requirement set by European Central Bank supervisors.

Unveiling a new strategy to 2024 in December, UniCredit CEO Andrea Orcel pledged to generate more than 16 billion euros in new capital over the following three years and pay that out to investors as dividends and share buybacks.

($1 = 0.9009 euros)

(Reporting by Valentina Za; Editing by Keith Weir)