Global financial stocks fall as more companies cut ties with Russia

  • US banks and payment companies fall
  • Deloitte and EY sever ties with Russia
  • VTB shuts down European digital bank phone lines
  • Crédit Agricole and UBS detail their exposure to Russia

LONDON/NEW YORK, March 7 (Reuters) – Global financial stocks fell on Monday on growing investor fears over the potential for economic damage and pressure on consumer spending as the price of oil soared after Russia’s invasion of Ukraine.

Lenders, investors and payment companies with ties to Russia have cut ties with the country. The moves come amid Western sanctions against Russia. As US sanctions aimed to limit the flow of Western money and harm the Russian economy, Ukraine called for a boycott of Russian energy exports.

Deloitte and EY announced on Monday that they would sever ties with Russia, mirroring decisions made by their colleagues at the Big Four accounting and consulting firms KPMG and PwC. These firms audit the accounts of blue chip companies and their work is often essential for companies to gain support from international investors. Read more

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European asset managers Carmignac and Fidelity International said they would not buy Russian stocks. Read more

Banks in the S&P 500 (.SPXBK) fell 4.8% on Monday and the broader financial sector in the S&P 500 (.SPSY) closed down 3.7% as the yield curve – the difference between the longer-term and shorter-term US Treasuries – narrowed, suggesting pressure on the United States. bank profitability. The banking index has fallen more than 10% since the conflict escalated on February 24.

Another consideration for bank investors could be the dilemma of whether to maintain business ties with Russia. Closing shops could be an arduous and costly process, according to banking sources and experts. Read more

Shares of U.S. payments companies fell on Monday, with American Express Co (AXP.N) closing 8.0% after announcing on Sunday that it was suspending all operations in Russia and Belarus, joining Visa Inc (VN), which fell 4.8% and Mastercard Inc. which fell 5.4% after their similar announcements the previous day, as well as payment company PayPal Holdings Inc (PYPL.O), which fell 6.3%. Read more

Investor worries about the global economy were heightened by signs of rising prices at the gas pump over the weekend. The United States and Europe have said they are considering a ban on Russian oil imports, which could further fuel energy prices and inflation and dampen any recovery.

“You’re starting to hear more and more drumbeats from investors about the possibility of a recession due to inflationary conditions, said RJ Grant, head of trading at Keefe, Bruyette & Woods in New York.

“The market needs some sort of short-term resolution with the Russia-Ukraine conflict because there is too much uncertainty in the macroeconomic situation for people to feel comfortable putting money to work. .”

Shares of other financial companies also came under fire on Monday amid fears over consumer spending. Capital One Financial (COF.N) ended down almost 7% and Discover Financial (DFS.N) closed down 8%. Discover said at a conference last week that the dispute should have virtually no impact on its fundamentals, according to a transcript of the event.

“Payment names are starting to bake in a slowdown in consumer spending,” Oppenheimer analyst Dominick Gabriele said, citing concerns about inflation’s damage to real incomes.

Additionally, the war has cast doubts on the return of cross-border travel to pre-pandemic levels, which would imply less revenue than expected for payment networks.

“Travel in Europe is the cross-border key for Visa and Mastercard,” said Gabriele.

However, JPMorgan strategists were advising clients to grab some battered Russian assets on the cheap, touting bonds from Russian companies that aren’t on the sanctions list and have large international operations as the best way to take advantage of prices. in trouble. Read more

Russian bond prices have fallen to record lows since Moscow invaded Ukraine as investors worry about their ability to pay due to coordinated Western sanctions.

Russia calls its actions in Ukraine a “special operation”.

The sanctioned Russian banks have been quick to adapt. VTB’s consumer digital bank (VTBR.MM) in Europe has disabled its phone lines due to high call volumes, according to a notice posted Monday on its website. Read more

Regulators are preparing for a possible shutdown of VTB’s European branch, Reuters reported last week, read more

France’s Credit Agricole (CAGR.PA), said its exposure to Russia and Ukraine was about 6.4 billion euros ($6.95 billion) in on- and off-balance sheet items , but that this would not affect the distribution of its 2021 dividend. Read more

Swiss banking giant UBS (UBSG.S), in its annual report, had pegged its direct exposure to Russia at $634 million for the end of 2021. It said the exposure had since been reduced, but could be affected by penalties. Read more

european banks

The eurozone banking stock index (.SX7E) closed down 4.1% on Monday after falling 9.6% to a 13-month low earlier on Monday, before paring losses.

Shares of lenders operating in Russia suffered with Austrian Raiffeisen (RBIV.VI), Italy’s UniCredit (CRDI.MI) and France’s Societe Generale (SOGN.PA) falling into double-digit percentage ranges early Monday , although they regained some ground later.

($1 = 0.9204 euros)

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Reporting by Sinead Carew and David Henry in New York and Carolyn Cohn in London, Additional reporting by Huw Jones in London, Sachin Ravikumar in Bangalore, Tom Sims in Frankfurt, Sudip Kar-Gupta in Paris, Brenna Hughes Neghaiwi in Zurich and Joice Alves and Saikat Chatterjee in London Writing by Iain Withers Editing by Jason Neely, Matt Scuffham and Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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