CONCLUSION 2-Goldman exits Russia as European banks reveal billions in exposure

Goldman Sachs Group Inc on Thursday became the first US bank to pull out of Russia after its invasion of Ukraine, while Credit Suisse said it had gross exposure to Russia of 1.6 billion Swiss francs ( $1.73 billion) at the end of 2021.

Goldman Sachs, which has credit exposure to Russia of $650 million, said it was winding down operations there, which will likely increase pressure on rival lenders to follow. Any loss would be “immaterial”, according to a source close to the situation.

Western companies have withdrawn en masse from Russia as the United States, European Union and Britain imposed sanctions aimed at cutting off Moscow’s access to the global financial system in response to its invasion of Ukraine . Banks, insurers and asset managers, who rarely make political statements, have rushed to distance themselves from Russia and assess their risks as the conflict enters its third week.

Credit Suisse was the latest European bank to reveal the scale of potential losses, which it said included loans to high net worth clients as well as exposure to trade finance and investment banking. Italy’s UniCredit and France’s BNP Paribas also disclosed billions of euros of Russian risk. In an extreme scenario, banks could lose everything if Moscow seizes assets and sanctions render Russia-related securities worthless.

Deutsche Bank said its credit risk exposure to Russia and Ukraine was 2.9 billion euros and it had further reduced its exposure to Russia over the past two weeks. Russia calls its actions in Ukraine a “special operation”.

While the potential losses for major European lenders are not large enough to threaten their stability, analysts and investors fear it could derail their recovery plans and halt payouts to shareholders. The dispute has also potentially upended interest rate hikes planned by the European Central Bank, with its policymakers due to meet on Thursday, divided on how to proceed and fearful of making mistakes.

BNP Paribas, meanwhile, has cut its Russia-based workforce from its internal IT systems as it seeks to strengthen its defenses against any potential cyberattacks, in another sign of how the conflict is hitting Western financial institutions. The French bank, believed to be the first major lender to bar Moscow staff from its computer networks, has also placed employees in other locations on high alert for cyber threats emanating from Russia. ($1 = 0.9269 Swiss francs)

(Reporting by Lawrence White and Brenna Hughes Neghaiwi; Additional reporting by Sinead Cruise and Toms Sims. Editing by Jane Merriman, Michelle Price and Nick Zieminski)

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