In light of the recent geopolitical turmoil, we have received some questions around the U.S. banking sector exposure to Russia and Ukraine as tensions and sanctions simmer. The short answer: we see very limited impact to the handful of U.S. banks with any sort of meaningful international presence, both in terms of balance sheet and revenue risk. Direct exposures to the countries are small-to-nonexistent and while there are always knock-on risks, we would think the banks fairly well insulated; there’s clear implications for various commodity markets for example, but bank balance sheet risk typically arises from cratering prices, not rising ones (notwithstanding second order impacts for counterparties with commodity input costs). To fully contextualize: the most at-risk bank (Citi) has less than 0.5% balance sheet exposure to Russia, and the most at-risk from a capital markets revenue standpoint (Goldman Sachs) has less than 0.1% revenue exposure.
From a credit and market risk standpoint, Citigroup, owing to its international lending presence, is the most exposed and the only U.S. bank to disclose Russia as one of its top country exposures (#20). Still, the ~$5.5 bn of Russian exposure is small and manageable at ~0.3% of aggregate Citi exposure—of that $5.5 bn, we estimate ~$700 mn is slated for sale as part of the company’s exit of most international consumer businesses (Russia was one of the original 13 markets targeted for exit).
While we do not have updated country exposures to Russia beyond Citigroup (telling in and of itself, meaning Russia does not rise above the reporting disclosure threshold), conflict between the two countries is not exactly new and we can go back to the events and fallout of 2014 to get a sense of banks’ exposure.