By Tassilo Hummel and Lawrence White
PARIS/LONDON (Reuters) - Societe Generale (OTC:SCGLY) warned it could be stripped of its business in Russia, where it has more than 18 billion euros ($19.97 billion) of exposure, in one of the starkest indications yet by a global bank of the potential impact of fallout from Russia's invasion of Ukraine on Western banks.
Russia's Ukraine invasion has triggered a barrage of financial sanctions from the United States, Europe and Britain aimed at squeezing its economy, and Western companies have moved to sell off assets in Russia.
"The group has more than enough buffer to absorb the consequences of a potential extreme scenario, in which the Group would be stripped of property rights to its banking assets in Russia," the bank said on Thursday.
The comments from France's third-largest listed bank show how banks and other financial companies risk retaliation for these moves, including the possibility Russia could simply seize their assets in the country.
"The group's relatively high exposure to Russia casts a shadow over its outlook for 2022," analysts at DBRS Morningstar said on Thursday.
Even without the extreme threat of its assets being seized the French bank is likely to suffer from the economic impact of sanctions and rising defaults as Russian borrowers struggle.
A write-off in Russia could result in a 30 basis point hit to the lender's 13.7% core capital ratio, the DBRS Morningstar analysts said, manageable but likely to put pressure on it to restructure or cut costs elsewhere, as it did after reporting a loss in 2020.
The French bank said its exposure consisted of 15.4 billion euros within its Russian business SG Russia, and 3.2 billion euros outside Russia.
The bank "continues a detailed monitoring of the situation in Ukraine and Russia", it said.
"Societe Generale complies rigorously with legislation in force and diligently applies all necessary measures to strictly observe international sanctions", the bank added.
Most of that exposure comes via its 99.97% stake in Rosbank, which has around 13,000 staff and 5 million customers.
Asked whether SocGen intended to exit the Russian market or sell its Russian unit Rosbank, a spokesperson said the group had no comment on the matter.
Shares in Societe General rose 2% on Thursday, having fallen more than 20% this year after the Ukraine war triggered the international sanctions and hit banks like the French lender that are active in Russia.
($1 = 0.9013 euros)