By Cristina Roca 
 

UniCredit SpA gave details late Tuesday of its exposure to Russia and the maximum hit its capital could suffer in a worst-case scenario, and signaled that its buyback plans could be affected by this.

The Italian lender outlined exposure to Russia totaling around 7.4 billion euros ($8.06 billion).

In an extreme scenario where the entirety of this maximum exposure became nonrecoverable, the negative impact to its common equity Tier 1 ratio at the end of 2021 would amount to about 2 percentage points, UniCredit said. Its CET1 ratio--a measure of capital strength--stood at 15.03% at the end of 2021.

The bank said it doesn't consider this scenario as its base case, but that it is taking a prudent approach to shareholder returns. It confirmed its 2021 dividend, and said it would be able to keep its CET1 ratio above 13% even in the extreme scenario.

"Furthermore, we confirm our intention to execute the share buyback up to the previously agreed amount of EUR2.58 [billion], subject to our pro forma 2021 year end CET1 remaining above 13.0%. An ultimate capital impact from our Russian exposures lower than 200 [basis points] will enable us to use up to an equivalent amount for the share buyback," UniCredit said.

Analysts at Bank of America expect the buyback to go ahead as planned if the negative CET 1 impact is less than 113 basis points. The buyback would be executed partly if the hit were between 113 and 200 basis points, and canceled in case of a 200 basis-point loss, they said in a note.

The bank has promised to return at least EUR16 billion to its shareholders by 2024 through a mix of dividends and buybacks. It didn't comment on its capital-return plans in respect of future years, but said it will keep the market updated on the development of its Russian exposure.

UniCredit's direct exposure to Russia through its bank in the country is around EUR1.9 billion net of foreign currency hedges.

The bank has another EUR4.5 billion in cross-border exposure, almost all of it consisting of loans to Russian multinational companies. The loans are mostly in euros or U.S. dollars, it said.

It also has a mark-to-market derivative exposure to Russian banks, through which it calculates it could suffer a maximum potential loss of around EUR1 billion, should the Russian ruble tend to zero.

 

Write to Cristina Roca at cristina.roca@wsj.com

 

(END) Dow Jones Newswires

March 09, 2022 04:09 ET (09:09 GMT)

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