The leaders of Europe's largest financial institutions have dismissed Russia as a concern in spite of the ruble's precipitous fall ahead of the Finance Ministry's sell-off Wednesday.
The Russian central bank has made numerous interventions in forex markets to prop up the ruble and in the latest effort to stop the rout, hiked key interest rate to 17 percent on Monday.
Although at first the currency seemed to strengthen following the move, the ruble's slide then resumed with gusto. However, that slide appeared to have been arrested after the country's finance ministry announced that it was selling off some of its foreign currency reserves.
Despite the continuing economic turmoil, the chief executive of Societe Generale, one of the largest foreign lenders in Russia, told CNBC he wasn't too concerned over Russia although the bank was keeping a close eye on the country.
"In Russia, we look at the long term and what we see today is, yes, less opportunities for certain activities," Frederic Oudea told CNBC Tuesday. "But on the other hand some of our clients – in particular, the multinational companies -- request local funding from us so the business plan is adapted with more local financing of the economy. Of course, we monitor our risk very strongly," he said
The bank's exposure to Russia was only 3 percent of its total business, Oudea said, reiterating the bank's commitment to the country. Russia should not "be put in the same basket" as eastern Europe, where the bank also has operations in the Czech Republic, he said.
Russia's economic turmoil has been prompted largely by a loss of international confidence in the country after its alleged incursions into Ukraine began earlier this year. The ruble has weakened around 50 percent against the dollar as European sanctions imposed on Russia have taken hold, with capital flight and the decline in oil prices –on which Russia depends - exacerbating the economic crisis.
Despite Oudea's assurances over the country, the bank's Russian unit, Rosbank – the group's "largest asset outside France," according to Rosbank's website -- has hurt the company's overall profits over the last year. In May, the group reported a 13.3 percent drop in first-quarter net income, as it booked a 525 million euro writedown on Rosbank as the crisis in Ukraine weighed on profits.
SocGen is one of the largest foreign lenders in Russia, alongside Italian bank Unicredit and Austrian bank Raiffeisen – which has around 15 billion euros worth of assets in Russia, putting it in tenth place in terms of assets among Russian banks.
All three banks have seen their share prices fall over the last year—and most sharply over the last week as Russia's situation has deteriorated -- with their exposure to Russia at least one reason for the decline in investor confidence although the banks' leaders have been keen to dismiss their exposure to damage.
The chief executive of Italian bank Unicredit – the second-largest foreign bank in Russia after SocGen -- was also keen to appear sanguine over Russia's economic turmoil, however. "The ruble's decline isn't having an impact on the Russian unit because its assets are denominated half in rubles, with most of the remainder in dollars," Federico Ghizzoni said, speaking at a press conference in Milan Tuesday. He added that the bank's Russian unit would not book any writedowns in the fourth quarter of 2014 or in 2015 and that , in fact, it expected its results to be in line with our expectations, if not slightly better."
As European markets fell at the open on Wednesday, one market analyst stressed that contagion from oil and emerging markets like Russia appeared to be catching up with European equities.
"As a major trading partner, Russia's funding problems are expected to start hitting home in Europe," Jasper Lawler, market analyst at CMC Markets U.K. said in a note.
"Multiple major money-center banks appear to no longer be pricing USD/RUB because of the crashing ruble, cutting Russian companies and individuals off from global financing."