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UniCredit considers leaving Russia; the markets are pending payment of the sovereign debt

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By Valentina Za, Carolyn Cohn and Marc Jones

MILAN/LONDON, March 15 (Reuters) – UniCredit is urgently reviewing its business in Russia and could decide on a costly exit from the country following the invasion of Ukraine, the Italian bank’s chief executive said on Tuesday, as markets await payment. of Russian sovereign debt.

A growing list of financial firms is considering exiting Russia, and Deutsche Bank, Goldman Sachs and JPMorgan Chase are scaling back their business there.

Unicredit CEO Andrea Orcel also said that the economic environment has changed due to the crisis in Ukraine and the bank now assumes that there will be stagflation, a combination of low and high inflation.

Last week, Italy’s second-largest bank said it would cost about 7.4 billion euros ($8.1 billion) to write off its Russian business entirely, including cross-border exposure, leaving its capital distribution plans to shareholders hanging by a thread.

UniCredit is one of the European banks most exposed to Russia. Its shares fell 3.2%, and an index of European bank stocks fell 1.8%.

Russia has $117 million in payments due Wednesday on two dollar-denominated Eurobonds. Its Ministry of Finance indicated that it will pay in rubles if the sanctions prevent it from paying in dollars, which the markets would consider a default.

A default would add further pain to the Russian economy and financial system, making it harder for Moscow to seek new sources of credit and driving up future borrowing costs, a US Treasury official said late on Monday.

The official told Reuters that Treasury believes there are limited direct exposures in the US financial system to Russian sovereign bonds and that the main impact will be on a Russian economy already reeling under the weight of Western sanctions.

(1 dollar = 0.9088 euros)

(Written by Carolyn Cohn; edited in Spanish by Carlos Serrano)

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