Valentina Za, Iain Withers

MILAN/LONDON – Investors were reassured Wednesday by UniCredit in Italy and BNP Paribas in France (OTC:), despite revealing billions of euro of potential losses from Russia’s financial shockwaves.

After Russia’s invasion, which started last month, heavy sanctions from the West have forced banks and insurers to assess the risks they face and distance themselves.

UniCredit announced late Tuesday night that it would write off its Russian operations for 7.4 billion euro ($8.1 billion). The announcement cast doubt on the plans to distribute capital by Italy’s second-largest bank.

BNP Paribas stated that its total exposure was around 3 billion euro ($3.3 billion) to Russia, Ukraine and other countries. However, it maintained that this amount is relatively small and adhered to previously set 2025 financial targets.

Since Russia invaded Ukraine, the shares of major European financial companies have plummeted. Investors were alarmed at Russia’s links and braced themselves for an economic slowdown.

UniCredit stated that a worst-case scenario could reduce its capital ratio by two percentage points. However, it confirmed cash dividends as well as plans to buy back shares, which reassured investors.

Both banks’ shares rose by over 9% during early trading. The wider STOXX European Banks index was up 5%, indicating a partial recovery from recent declines.

The European bank index has fallen by more than 25% since Russia’s invasion on February 24, while the benchmark STOXXX index fell only 10%.

The biggest Russian exposures among European banks are Austria’s Raiffeisen Bank International, France’s Societe Generale and Austria’s Raiffeisen Bank International. Raiffeisen’s shares increased by 14% and SocGen increased by 8%.

Two of the world’s largest insurers Prudential and Legal & General said on Wednesday they had very small exposures to Russia and no plans to increase holdings, in spite of blistering sell-offs that have attracted the attention of some opportunistic buyers.

($1 = 0.9123 euros)