Credit Suisse Group AG said it had 848 million Swiss francs (US$915 million) of credit exposure to Russia at the end of last year, warning that an increase in trading and hedging activity after Moscow’s invasion of Ukraine would likely be offset by higher provisions and lower deal-making.
Russia exposure includes derivatives and financing at the investment bank, trade finance at the Swiss business, and lombard and other loans within private banking, Credit Suisse yesterday said in a statement.
The Swiss bank said it has minimal exposure to sanctioned individuals within wealth management and said its Russia market risk exposure is not significant.
The Zurich-based lender still maintains an office in Moscow and is seen as a key bank for managing expatriate Russian wealth.
“We have reviewed our positions and believe that the bank’s exposure in relation to Russia is well-managed, with appropriate systems in place to address associated risks,” Credit Suisse CEO Thomas Gottstein said. “As a matter of principle and policy, Credit Suisse applies all sanctions, in particular those issued by the EU, the United States and by Switzerland.”
The bank is one of the few to give an indication as to how the invasion is affecting business, at least in the short term, signaling that demand for trading and hedging is up again, along with the fear of loans going bad.
The dynamic is similar to that at the beginning of the COVID-19 pandemic. The resurgence in trading is likely to be offset by a reduction in capital market issuance.
The bank said it would be “premature” to estimate the longer-term effects of the war on the global economy, markets and clients’ risk appetite.
Credit Suisse is monitoring several factors that could limit its ability to settle transactions or realize collateral, including open transactions with Russian banks and nonbank counterparties, it said.
The bank’s Moscow office has approximately 125 employees working across wealth management and the investment bank.
The firm said it has “planned for a number of potential scenarios,” without giving more details.
Net assets held in the bank’s Russian operations were SF195 million as of Dec. 31 last year.
JPMorgan Chase & Co Global Markets head Troy Rohrbaugh said that a lot of clients are under “extreme stress” tied to the effects of the invasion, adding that the volatility was also affecting the US bank’s revenue.
Wealthy Russians with links to Russian President Vladimir Putin have seen their assets frozen across the world, while other rich bank clients who borrowed against Russian assets have to come up with more collateral after those securities plunged in value.
UBS Group AG and Credit Suisse are triggering margin calls on some customers who use Russian bonds as collateral, after marking down the value of debt issued by the country and its corporations.
Earlier this week, UBS said it had about US$200 million exposure to Russian assets that were used as collateral in loans to clients at its wealth unit.
UBS also identified “a small number” of wealth management clients who have been sanctioned in response to the invasion, it said in its annual report on Monday.
Those clients had less than US$10 million in total loans outstanding as of Thursday last week.
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