Ukrainian Sanctions May Harm Sale of Local Russian Bank Subsidiaries - Fitch

MOSCOW (Sputnik) — On Thursday, Ukrainian President Petro Poroshenko approved the Ukrainian National Security and Defense Council's proposal to impose one-year sanctions on subsidiaries of five Russian state banks, including Russia's largest bank Sberbank and VTB. The subsidiaries are no longer able to take assets out of Ukraine. National Bank of Ukraine Deputy Governor Kateryna Rozhkova later stated that all Russian banks partly owned by the government were looking to sell their Ukrainian subsidiaries.

"It can make clients nervous and cause an outflow of funds which will have to be replenished by the parent banks, given that the money will not be recovered in the near future due to the sanctions… It can also weaken the parent banks' bargaining position when discussing the sale of their subsidiaries," Danilov said.

The parent structures will feel no impact otherwise due to little exposure to the Ukrainian market, according to the financial expert.

"Even given a worst-case scenario there will be no significant damage as the Ukrainian banks are very small, less than 1 percent of net Sberbank and VTB assets and some 2 percent of Vnesheconombank assets," he explained.

Sberbank has vowed to safeguard the interests of its Ukrainian customers despite the sanctions and to continue work while calling Kiev's move politically motivated. Other banks, including VTB and Vnesheconombank, have spoken of plans to fully or partly withdraw from the Ukrainian market.