Citigroup Discloses $10B Exposure to Russia; Shares Fall 4.4%

Banking behemoth Citigroup Inc. (C) disclosed on Monday that it has approximately $10 billion in exposure to Russia. Following the news, shares dropped 4.4% to close at $59.23 on February 28.

Amid the ongoing invasion of Ukraine by Russian forces, the governments of various nations are trying to work on a peaceful resolution for both countries involved. Nonetheless, the war which started last week, has already impacted stock markets worldwide, penalizing companies that have exposure to either nation.

On Saturday, western nations including the U.S., Britain, Europe, and Canada imposed additional sanctions on Russia to hinder its strength against Ukraine.

The new sanction includes the blocking of certain banks’ access to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) international payment system, which facilitates easy money transfers between global banks and financial institutions. These increased sanctions can hurt the value of Russian assets held by banks.

Citigroup’s Russian Exposure

Citigroup, has disclosed its financial exposure in Russia. According to a regulatory filing with the Securities and Exchange Commission (SEC) filed yesterday, Citi revealed that Russia ranks 21 in its Top 25 list of country exposures as of December 31, 2021.

As per the filing, Citi has $5.4 billion in loans, securities, and investments in Russian assets. This represents 0.3% of its total exposures in 2021.

Additionally, Citi revealed that it has $1.0 billion in cash and placements with the Bank of Russia and other financial institutions. Apart from this, Citi also has $1.8 billion in reverse repurchase agreements with counterparties. All these exposures sum up to $8.2 billion.

Moreover, Citi has a further $1.6 billion of exposure to Russian counterparties that are not part of the above-mentioned $8.2 billion, bringing the total to about $10 billion.

Official Comments

In the filing, Citi said, “Citi operates both its Institutional Clients Group (ICG) and Global Consumer Banking (GCB) businesses in Russia, although the Company is currently pursuing the exit of its GCB business in the country. All of Citi’s domestic operations in Russia are conducted through a subsidiary of Citibank, which uses the Russian ruble as its functional currency.”

“Citi continues to monitor the current Russia–Ukraine geopolitical situation and economic conditions and will mitigate its exposures and risks as appropriate,” the bank added.

Analysts’ View

On Monday, Wells Fargo analyst Mike Mayo reiterated a Buy rating on the stock, but said that he is lowering his EPS estimates for FY22 to $5.90 per share from the earlier $6.00 per share.

Mayo is looking forward to Citi’s investor day scheduled for March 2, and expects to get further clarity on the bank’s exposure to Russian assets as well as the bank’s broader long-term outlook.

Citi is one of the best bank stocks, with a Moderate Buy consensus rating based on 10 Buys and 7 Holds. The average Citigroup price target of $76.66 implies 29.4% upside potential to current levels. Its shares have lost 12.3% over the past year.

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