Because of Russia's invasion of Ukraine, investors in financial service providers are suffering severe losses.

The losses of Austrian banks are particularly high.

Among them, Raiffeisen Bank International (RBI) is hit hardest.

Their value on the stock exchange has halved since the beginning of the year.

Erste Group, Bawag and Addiko are also under pressure.

The reason for this is that compared to some other countries, your risk in Russia is relatively high.

Michael Seiser

Business correspondent for Austria and Hungary based in Vienna.

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Austria's second-largest bank, RBI, generates more than a third of its profits there.

The shares are now trading at 13 euros.

They cost around a tenth of the highest value they had reached since the IPO in 2005.

Hardly anyone knows whether this is an ideal time to start.

Surprisingly, many analysts recommend buying - albeit in the previous week.

Roland Neuwirth, Manager of the Advisory Flexible Fund, has also bought: “In the worst case, 3 billion in equity in Russia, Ukraine and Belarus would be gone.

The bank could handle that.”

Taking into account the loss of the corresponding profits, the new price target would be around 20 euros at a price-earnings ratio (P/E) of 10.

But Neuwirth also says: "RBI is something for the die-hards." After all, there is a low probability that Russian President Putin will backtrack.

Sanctions "manageable by far"

But even then, Austrian banks in the country of this unpredictable politician have many imponderables.

According to data from the Bank for International Settlements (BIS), their total exposure to Russia as of the end of September 2021 was $17.5 billion.

Only Italy and France have higher credit claims in Russia.

From the two countries, the Italian Bank Austria parent company Unicredit and the French Société Générale are the most active in Russia.

On the other hand, the risk of German banks is only about half as large as in Austria at around 8.1 billion dollars.

Thomas Url, economist at the Austrian Institute for Economic Research (Wifo), points out that a large part of the credit volume is refinanced locally and is therefore not a threat to the parent companies.

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On Monday evening, the ECB placed Raiffeisen and other financial service providers under special surveillance.

A withdrawal plan from Russia was reported by the Reuters agency on Tuesday, after which the bank denied it.

According to Stefan Pichler, the bank scientist at the Vienna University of Economics and Business, the sanctions and the Ukraine war are “by far manageable” for RBI even in the worst case.

The RBI has corresponding provisions, said Pichler.

Russia, Ukraine and Belarus have been important sources of income for the bank in the past.

In the medium term, the banking expert expects a strategic reorientation due to severe market turmoil.

It's uncomfortable, but not threatening, says Pichler.

It is still difficult for economists to assess the second-round effects of the crisis,

for example when Austrian industrial companies lose large assets.

These effects would indirectly affect the Austrian banks as lenders.