U.S. stock markets and exchange traded funds aren’t completely immune to the goings-on in Russia.
For example, financial and bank sector-related exchange traded funds are getting dinged by Citigroup Inc.’s (NYSE: C) exposure to Russia.
On Monday, the Financial Select Sector SPDR (NYSEArca: XLF) was down 2.2%, and the Invesco KBW Bank ETF (NASDAQ: KBWB) fell 2.0%.
Meanwhile, Citigroup shares plunged 5.3% on Monday. Citigroup makes up 7.8% of KBWB’s underlying portfolio and 3.0% of XLF’s.
Citigroup shares retreated after the company disclosed that it had almost $10 billion in total exposure to Russia as of the end of 2021, taking indirect fire from global sanctions on Russia’s economy after its invasion of Ukraine, the Wall Street Journal reports.
While sanctions from Western countries have targeted Russia’s biggest banks, oligarchs, and companies to isolate Russian President Vladimir Putin for his actions against Ukraine, Citigroup finds itself exposed with an on-the-ground presence in Russia and Ukraine, which includes $2.2 billion in corporate loans, $700 million in consumer loans, and $1.5 billion in investment securities. Citigroup units around the world also hold $1.6 billion in other Russian entities.
Along with those loans and investments, Citigroup disclosed that it held $1 billion in cash at financial institutions such as the Russian Central Bank and $1.8 billion in reverse repurchase agreements with others.
The only saving grace was that Citigroup had halved its Russian exposure after Russia forcefully annexed Crimea in 2014, and the bank, along with others, has held back from making larger plays on Russia since.
“Citi continues to monitor the current Russia–Ukraine geopolitical situation and economic conditions and will mitigate its exposures and risks as appropriate,” the bank said.
Additionally, Citigroup has been working to ensure the safety of some 200 of its employees in Ukraine and said that it already evacuated foreign workers in Ukraine ahead of Russia’s invasion.
In a research note on Monday, Oppenheimer analysts argued that U.S. bank exposure to Russia was “limited,” the Financial Times reports.
“The harder to figure issue is the indirect exposure, given that many European banks (particularly French, Italian and Austrian) have much bigger exposures and could clearly be impacted much more severely,” the analysts said.
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