Financial firms from Frankfurt to Wall Street saw their stock prices plummet on Thursday as they dealt with the fallout from Russia’s invasion of Ukraine, processed fresh sanctions, and hastened to advise clients on how to respond.
While many bankers have downplayed Russia’s relevance to their businesses, statistics reveal that it is the EU’s fifth-largest commercial partner, accounting for 5% of commerce. The United States’ trade with Russia accounts for less than 1% of its total.
As the US and European officials placed new sanctions on Moscow, Deutsche Bank (DBKGn), Germany’s largest banking institution, said it has contingency plans.
Lloyds (LLOY), a British bank, was on alert for cyberattacks, while Allianz (DEALVG), an asset management giant, said it had halted its Russian government bond exposure.
While US institutions were well-prepared for the sanctions imposed so far in response to Russia’s aggressiveness in Ukraine, they were concerned that fresh sanctions would raise the cost and difficulty of enforcing them. As a result, sanctions are mostly enforced by financial institutions.
Sberbank and VTB saw their stock prices drop by 37% and 41%, respectively.
Leading bank shares plummeted, with the European banking sector losing 8% of its value, compared to a 3.3 percent drop for the Euro Stoxx index. The S&P 500 banking index fell 2.5 percent in the United States.
This week, the Dow has dropped 2.5 percent, putting it on track to have its worst weekly performance ever. In addition, President Joe Biden announced new sanctions against Russia on Thursday afternoon, part of a larger campaign to cut Moscow off from the global economy.
Due to rising geopolitical concerns, major indices are on course for their third consecutive week of losses. However, after dropping 859 points at its session low, the blue-chip Dow closed the day around 90 points higher.
All three averages are already in the adjustment zone, meaning they are down almost 10% or more from their previous highs. The Nasdaq began Thursday’s session in the bear market territory, falling more than 20% from its November high.