Final spring, Citi launched a plan to tug itself out of retail banking in 13 markets. And it managed to search out consumers in seven. One of many free ends, nonetheless, is Russia.
As sanctions in opposition to that nation increase — stemming from the invasion of Ukraine final week — it’s turning into more and more doubtless {that a} Russia consumer-banking unit will stay on Citi’s stability sheet longer than the Wall Avenue financial institution maybe had hoped.
Citi warned traders Monday in a submitting that it had $9.8 billion in publicity to Russia on the finish of 2021 — by far the very best whole of any giant U.S. financial institution. That features $5.4 billion in loans, securities and funding commitments the financial institution classifies altogether as “nation publicity.”
Add to that one other $1 billion in money Citi has at Russia’s central financial institution — at the moment motionless — and $1.8 billion of reverse repurchase agreements with numerous counterparties, and Citi has a “whole third-party publicity” of $8.2 billion. The opposite $1.6 billion encompasses publicity to Russian entities by Citi verticals outdoors the financial institution’s Russia unit.
Nonetheless, there are 20 markets to which Citi is extra uncovered than Russia, in line with the submitting. The $5.4 billion Russia determine pales subsequent to the $95.9 billion Citi counts in “nation publicity” to Britain, for instance.
But by comparability, Goldman Sachs, in its personal submitting final week, estimated its whole market publicity to Russia at $414 million as of December. And neither JPMorgan Chase nor Financial institution of America, of their most up-to-date annual studies, listed Russia amongst their 20 markets with probably the most monetary publicity, the Monetary Instances reported.
“Citi continues to observe the present Russia-Ukraine geopolitical scenario and financial circumstances and can mitigate its exposures and dangers as applicable,” the financial institution mentioned in Monday’s submitting.
No surprises
Maybe it’s getting any potential surprises out on the desk (traders hate surprises) forward of its investor day Wednesday. In the identical submitting, Citi warned that the Securities and Change Fee (SEC) is investigating the financial institution’s “compliance with record-keeping obligations for broker-dealers and funding advisers in reference to business-related communications despatched over unapproved digital messaging channels.”
JPMorgan Chase in December agreed to pay $200 million in penalties to the SEC and the Commodity Futures Buying and selling Fee (CFTC) over failures to keep up and protect such communications, and different banks reminiscent of Goldman, HSBC and Deutsche Financial institution have included related warning language in their very own current annual studies.
Because it stands, Citi opted to make its investor day digital after two of the financial institution’s senior managers — CFO Mark Mason and Paco Ybarra, head of the institutional shoppers group — examined optimistic for COVID-19, Bloomberg reported Monday.
“Whereas we hoped to host our Investor Day in particular person, well being and security should be our high precedence,” CEO Jane Fraser mentioned in a press release seen by the wire service. “We imagine a digital format is the fitting resolution given our circumstances, and we stay enthusiastic about and dedicated to presenting our technique, progress over the past yr and our path ahead to our traders this week.”
No new floor
As for Citi’s Russia client financial institution, VTB Financial institution supplied a glimmer of hope final yr. An official for the Russian authorities majority-owned financial institution mentioned on the time that VTB was involved in bidding on the unit, in line with The Wall Avenue Journal. However VTB is among the many banks the U.S. sanctioned final week.
Citi wouldn’t be breaking new floor if it had been compelled to shut its Russia client financial institution. Citi reported in November it will incur no less than $1.2 billion to get itself out of retail banking in South Korea after failing to promote the unit. Its Russia footprint — encompassing three Moscow branches, two St. Petersburg areas and a handful of different outposts — is significantly smaller.
Wells Fargo analyst Mike Mayo mentioned Citi would doubtless have so as to add $300 million to its reserves to cowl potential losses on almost $3 billion of loans included in its Russia publicity determine, Reuters reported.
Amongst Citi’s $5.4 billion “nation publicity” is $2.2 billion in company loans and $700 million in client loans, together with $1.5 billion in funding securities, The Wall Avenue Journal reported. Citi has lower its Russia publicity in half because the nation’s 2014 annexation of Crimea, in line with the outlet.