• Societe Generale has EUR 18.6 billion exposure to Russia as on 31 December 2021.
• During 2021, Russian operation constituted 2.8% of the net banking income and contributed 2.7% of the Group net income.
• Potential extreme scenario may involve stripping of property rights related to banking assets in Russia
• With CET1 ratio standing at13.7% SG is well positioned to absorb the financial shock arising in potentially extreme scenario.

Societe Generale has EUR 18.6 billion exposure to Russia as on 31 December 2021. Exposure represents 1.7% of the total exposure at default. SG will have to bear the loss arising from default related to Russian counterparties and subsidiaries whose assets are mainly located in Russia. This exposure includes both on and off-Balance Sheet items.  Exposure includes investment by SG  Russian banking operations, comprising of Rosbank, Rosbank Insurance and few other entities  to the extent of EUR 15.4 billion. In addition to this  SG has offshore exposures  of EUR 3.2 billion made through other entities sitting outside Russia

During 2021, Russian operation constituted 2.8% of the net banking income of the Societe Generale and contributed 2.7% of the Group net income.

SG has 99.97% stake in its banking subsidiary Rosbank. Rosbank CET1 ratio stands at 10.74%. Capital Adequacy Laws in Russia required CET 1 to be around 8% and Rosbank CET 1 has a cushion of 274 bps over and above the regulatory minimum. Rosbank has a loan-deposit ratio of around 80% and exposures is focussed 99.7% on retail and 68% on corporate respectively. Lending is in local currency.

Retail outstanding account for approximately 41% of SG Russia’s total exposure. They are 70%- of the exposure is secured in nature represented by mortgage and auto loans and remaining 30% exposure is unsecured in nature, comprising mainly of loans to employees of Rosbank’s corporate clients whose salaries are processed by bank. Corporate exposure accounts for 31% of the total SG Russia’s exposure and primarily involves large corporate lending.

SG has EUR 3.7 billion exposure to Russian Sovereign debt. Out of this EUR 1.2 billion relates to Sovereign bonds.  As on 31 December 2021, Group’s exposure to Ukraine is less than EUR 80 million. Offshore exposures of EUR 3.2 billion include EUR 2.2 billion in metals and minerals sector, EUR 0.7 billion in energy, EUR 0.2 billion in transport and telecoms and EUR 0.1 billion for financial institutions.

In order to lower the exposure risks and further preserving the liquidity, SG has said that it will focus on collections. Rosbank is the principal platform for rouble clearing business on behalf of the Group’s key clients.

According to Societe Generale the potential extreme scenario may involve stripping of property rights related to banking assets in Russia. As on 31 December 2021, Rosbank has net book value of approx. EUR 2.1 billion. This will have negative impact of around 50 basis points on CET1 ratio. However, Societe Generale at a group level has CET1 ratio stands at13.7% which is over and above the regulatory minimum by 470 bps. SG is well positioned to absorb the financial shock arising in potentially extreme scenario.

Bureau Galactik Views