FT : Western banks prepare for $10bn hit in retreat from Russia

Western banks prepare for $10bn hit in retreat from Russia
Ukraine invasion forcing US and European lenders with thousands of staff in country to depart

Western banks are steeling themselves for a $10bn hit on their forays into Russia, as they prepare to pull out of the country because of its invasion of Ukraine.

International sanctions have forced banks to consider turning their backs on a country that some lenders first entered more than a century ago.

This week a string of European banks set aside billions of euros in provisions ahead of the closure of their Russian operations, following similar moves by US lenders last month. Western banks collectively have $86bn of exposure to Russia — with close to 40,000 staff — and are setting aside more than $10bn in expectation of losses on their ventures, according to Financial Times calculations.

Italian lender UniCredit this week set aside €1.3bn to cover potential losses, warning that it could face a loss of €5.3bn if its entire Russian business was wiped out. “I’m sure you have noticed the speed of change in terms of . . . waves of sanctions,” said UniCredit chief executive Andrea Orcel.

The bank, which has 4,000 workers and 2mn customers in the country, has been in Russia for 17 years.


Société Générale, the French lender that first entered Russia 150 years ago, has set aside €561mn of provisions for the first quarter, mainly tied to the war in Ukraine.

The bank said last month that it had agreed to sell its Rosbank subsidiary to an investment company founded by billionaire Vladimir Potanin and expects to take a €3.1bn ($3.3bn) hit on the sale. The French lender has 3.1mn retail customers in Russia and €18bn of exposure to the country. Rosbank employs 12,000 people.

Fellow French bank Crédit Agricole on Thursday announced a €389mn provision for its Russian exposure and said it was writing down €195mn for the total equity value of its Ukrainian business.

Austria’s Raiffeisen has 4.2mn customers and 9,400 staff in Russia, with €22.9bn of assets in the country — the most exposed of any foreign bank. Its €319mn of provisions for bad loans in the first quarter were mostly tied to the Ukraine war.

Credit Suisse last month said it had lost SFr206mn ($211mn) related to Russia’s invasion of Ukraine, with SFr148mn of trading losses and SFr58mn of credit losses.

Chief executive Thomas Gottstein said most of the bank’s 125 staff in the country were currently on paid leave as the bank weighs up how deeply to cut its operations. Around 4 per cent of the group’s wealth management assets, or SFr28bn, are linked to Russian clients.

Fellow Swiss lender UBS said it had cut its risk exposure by a third to $400mn since the start of the year, but this had brought $100mn of costs.

UBS added that EU and Swiss rules that prohibit accepting deposits of more than €100,000 from Russians not entitled to live in the European Economic Area affected 0.7 per cent of assets in its wealth management division.

Among US lenders, Citigroup has disclosed the largest direct exposure to Russia, warning of up to $3bn in potential losses linked to its operations in the country. The bank last month set aside $1bn for its Russian exposure.

Citigroup has been trying to divest its Russian consumer bank since last year and said in March it would expand its exit from Russia to include other operations.

JPMorgan Chase said it had provisioned roughly $300mn to cover markdowns on loans associated with Russia, although chief executive Jamie Dimon had warned investors at the start of April that the bank could lose up to $1bn on its exposure to the country.

Goldman Sachs as of March had $260mn in credit exposure, down from $650mn in December. The bank said in first-quarter earnings it had suffered a net loss of about $300mn on investments related to the country and Ukraine. Goldman has also said it is “winding down” its business in Russia while JPMorgan Chase has “been actively unwinding Russian business”.

Morgan Stanley said it had a “limited” direct exposure to Russia after giving up its banking licence in the country years before the invasion.

>>> US Research Calls

Research Calls

  • Upgrades:
    • AAON (AAON) upgraded to Buy from Neutral at DA Davidson
    • Boot Barn Holdings (BOOT) upgraded to Overweight from Neutral at Piper Sandler; tgt raised to $121
    • EPAM Systems (EPAM) upgraded to Buy from Neutral at BofA Securities; tgt raised to $400
    • Hersha Hospitality Trust (HT) upgraded to Buy from Hold at Stifel; tgt raised to $14.50
    • Jounce Therapeutics (JNCE) upgraded to Strong Buy from Outperform at Raymond James; tgt raised to $20
    • Melco Resorts & Entertainment (MLCO) upgraded to Buy from Outperform at CLSA; tgt lowered to $7.73
    • NextGen Healthcare (NXGN) upgraded to Buy from Neutral at Guggenheim; tgt $26
    • Pactiv Evergreen (PTVE) upgraded to Outperform from Sector Perform at RBC Capital Mkts; tgt raised to $13
    • Stellantis (STLA) upgraded to Buy from Hold at DZ Bank
    • TPI Composites (TPIC) upgraded to Buy from Neutral at ROTH Capital; tgt raised to $16
  • Downgrades:
    • AbbVie (ABBV) downgraded to Neutral from Outperform at Daiwa Securities; tgt $150
    • Amarin (AMRN) downgraded to Underweight from Neutral at JP Morgan
    • Ball Corp (BLL) downgraded to Sector Perform from Outperform at RBC Capital Mkts; tgt lowered to $81
    • Black Hills Corp (BKH) downgraded to Neutral from Buy at Mizuho; tgt raised to $76
    • Corteva (CTVA) downgraded to Neutral from Overweight at JP Morgan; tgt $58
    • fuboTV (FUBO) downgraded to Neutral from Buy at ROTH Capital; tgt lowered to $4.25
    • fuboTV (FUBO) downgraded to Underweight from Neutral at JP Morgan
    • Hanesbrands (HBI) downgraded to Hold from Buy at Stifel; tgt lowered to $13
    • iRobot (IRBT) downgraded to Underweight from Neutral at JP Morgan; tgt lowered to $45
    • Lancaster Colony (LANC) downgraded to Hold from Buy at The Benchmark Company
    • Synaptics (SYNA) downgraded to Hold from Buy at Summit Insights
    • Vapotherm (VAPO) downgraded to Hold from Buy at Canaccord Genuity; tgt lowered to $5
    • Vimeo (VMEO) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $10
    • Virgin Galactic (SPCE) downgraded to Hold from Buy at Canaccord Genuity; tgt lowered to $8
    • Wayfair (W) downgraded to Neutral from Overweight at Piper Sandler; tgt lowered to $65
  • Others:
    • FinVolution Group (FINV) initiated with an Outperform at CICC; tgt $5.63
    • Iteos Therapeutics (ITOS) removed from Best Ideas List at Wedbush
    • Unity Software (U) removed from Best Ideas List at Wedbush

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • ENDP -28.7%, QRTEA -26.9%, FTDR -23.1%, FUBO -21.8%, BILL -18%, UAA -16%, ZG -15.7% (also approves an additional $1 bln share repurchase authorization), NET -12.7%, BE -10.4% (also to install 1.5MW of solid oxide fuel cells), MAX -9.5%, PRI -9%, CFLT -8.7%, CMP -8.3%, DVA -7.2%, DLB -6.9%, CGNX -6.6%, IMGN -6.6%, SPCE -6%, LAZR -5.1%, AOSL -5%, PFSI -5%, VAC -5%, CRSR -4.8%, CDXS -4.7%, ICPT -4.7%, TDC -4.3%, GPRO -4.3%, LESL -4.2%, BGS -4% (also acquires frozen vegetable ops of Growers Express), CERT -3.7%, VRTX -3.5%, ING -3.3%, PACK -3.3%, IHRT -3.2%, NFG -3.2%, APPN -2.9%, WW -2.9%, TWST -2.7%, VLDR -2.6% (also names new CFO), LASR -2.6%, EAF -2.6%, NWSA -2.5%, GDOT -2.5%, MNST -2.5% (also plans market wide price increase), BECN -2.2%, CWK -2.1%, CLNE -2%, VST -2%, FND -1.8%, HUBS -1.8%, TAC -1.7%, DH -1.6%, AMN -1.5%, ENV -1.5%, GH -1.4%, PODD -1.3% (also CEO to step down, names new CEO), ED -1.3%, PRLB -1.3%, WISH -1.2%, CMBM -1.1%, MCK -1%

Other news:

  • TTI -3.3% (files for $400 mln mixed securities shelf offering)
  • PTON -2.9% (exploring sale of 15-20% minority stake according to WSJ)
  • DH -1.6% (names new CEO)
  • MUSA -1.4% (increases dividend)
  • AMZN -1% (AES enters into renewable energy Power Purchase Agreements with AMZN)

Analyst comments:

  • AMRN -2.2% (downgraded to Underweight from Neutral at JP Morgan)
  • CTVA -1.1% (downgraded to Neutral from Overweight at JP Morgan)
  • ABBV -0.8% (downgraded to Neutral from Outperform at Daiwa Securities)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • IRTC +20%, FNKO +18.1% (also investor consortium, including EBAY, will make a $263 mln investment in Funko), OPEN +12.6%, HYZN +10.3%, CCXI +10.2%, ATEC +9.2%, TPIC +8.3%, AVLR +7.9%, PGNY +7.8%, G +7.8%, PLYA +7.7%, PBH +7.2%, PBYI +7.1%, NTRA +7%, FLT +6.9%, DKNG +6.6%, DASH +6.1%, GDYN +6.1%, FYBR +5.2%, SQ +5.1%, BBDC +5%, ZIMV +5%, SR +5%, WWE +4.7%, STEM +4.6%, MELI +4.6%, VIR +4.6%, ATSG +4.3%, AMH +4.3%, OLED +4.2%, ENB +3.7%, OEC +3.3% (also to build only acetylene-based conductive additives plant in US), TXRH +3.3%, INGN +3.1%, PBA +3%, UMC +3%, NKTR +2.9%, AL +2.9%, FRG +2.9%, PBR +2.9%, AES +2.7%, NOG +2.6%, PRCT +2.5%, GTN +2.5%, YELP +2.4%, SG +2.3%, CNK +2.1%, LYV +2%, DNLI +1.8%, MDRX +1.7%, MRVI +1.6%, TWOU +1.5%, RDFN +1.5%, UNM +1.5%, EOG +1.2%, SYNA +1.2%, XNCR +1.1%, MP +1.1%, ACMR +1.1%, NRG +1.1%

Other news:

  • BBIG +28.8% (sets date for planned business separation of Cryptyde)
  • MYOV +8.3% (Myovant Sciences and Pfizer (PFE) provide update on supplemental New Drug Application for MYFEMBREE for the management of moderate to severe pain associated with endometriosis)
  • LFG +6.5% (RSG and LFG launch joint venture to develop 39 RNG projects)
  • DAR +4.9% (to acquire Brazil's FASA group for approx. R$2.8 bln)
  • AES +2.7% (AES enters into renewable energy Power Purchase Agreements with AMZN)

Analyst comments:

  • BOOT +3.2% (upgraded to Overweight from Neutral at Piper Sandler)
  • EPAM +1.2% (upgraded to Buy from Neutral at BofA Securities)

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • BBIG +32.7%, IRTC +24.2%, FNKO +21.6%, OPEN +14.1%, CCXI +12.9%, HYZN +10.3%, GDYN +10%, TWST +9.2%, ATEC +9.2%, VRAY +8.8%, AVLR +7.9%, PGNY +7.8%, G +7.8%, PLYA +7.7%, TPIC +7.5%, PBH +7.2%, PBYI +7.1%, FLT +6.9%, DASH +6.7%, LFG +6.5%, MELI +6.2%, SG +5.9%, SQ +5.7%, BBDC +5%, ZIMV +5%, DAR +4.9%, WWE +4.7%, ATSG +4.3%, AMH +4.3%, WW +3.8%, UNM +3.4%, OEC +3.3%, TXRH +3.3%, FND +3.2%, INGN +3.1%, PBA +3%, UMC +3%, AL +2.9%, FRG +2.9%, AES +2.7%, NOG +2.6%, PRCT +2.5%, NIO +2.4%, YELP +2.4%, WPM +2.3%, OLED +2.3%, NKTR +2.3%, SPWR +2.3%, NTRA +2.3%, DBX +2.1%, WISH +1.8%, DNLI +1.8%, MDRX +1.7%, STEM +1.7%, MRVI +1.6%, TTI +1.5%, TWOU +1.5%, RDFN +1.5%, VIR +1.5%, LCID +1.3%, SYNA +1.3%, EGLE +1.3%, XNCR +1.1%, MP +1%
  • Gapping down:
    • FTDR -21.4%, BILL -17.9%, FUBO -17.7%, ENDP -12.4%, ZG -11.4%, AOSL -11.4%, MAX -9.5%, NET -9.1%, PRI -9%, BE -8.3%, CMP -8.3%, DVA -7.2%, DLB -6.9%, CGNX -6.6%, CRSR -5.9%, LAZR -5.5%, PFSI -5%, VAC -5%, MTZ -4.8%, CDXS -4.7%, NLOK -4.5%, LESL -4.2%, TDC -4.2%, GPRO -4%, CERT -3.7%, SPCE -3.5%, IHRT -3.2%, VRTX -3.1%, NWSA -3%, ING -2.8%, LASR -2.6%, AMN -2.5%, GDOT -2.5%, DISH -2.4%, HCC -2.3%, ILMN -2.3%, BECN -2.2%, CWK -2.1%, SHAK -2%, MNST -1.9%, DH -1.6%, ENV -1.5%, PTON -1.4%, MUSA -1.4%, GH -1.4%, CFLT -1.3%, PODD -1.3%, PRLB -1.3%, CMBM -1.1%, MCK -1%

>>> Europe : Brokers Upgrades & Downgrades - 6th of May 2022 V2(+)

>>> Up
* Bombardier Raised to Buy at Vertical Research; PT C$2.20 (+)
* Elmera Group ASA Raised to Buy at Pareto Securities
* Fastighets AB Trianon Raised to Hold at Handelsbanken
* Hiscox Raised to Buy at HSBC; PT 1,100 pence (+)
* PSI Raised to Buy at GSC Research; PT 42 euros (+)
* Sievi Capital Raised to Buy at Inderes; PT 1.80 euros
* SocGen Raised to Neutral at BofA; PT 28 euros (+)
* SR-Bank Raised to Buy at Arctic Securities; PT 137 kroner
* Stellantis Raised to Buy at DZ Bank; PT $16.82 (+)

>>> Down
* Addex Therapeutics Cut to Add at Baader Helvea
* Airthings Cut to Hold at Arctic Securities; PT 7 kroner (+)
* Boohoo Cut to Hold at SocGen; PT 72 pence (+)
* Centrica Cut to Reduce at HSBC; PT 70 pence
* Credit Agricole Cut to Underperform at Mediobanca SpA (+)
* Nobia Cut to Hold at Nordea (+)
* Peab Cut to Hold at Handelsbanken
* Rathbones Group Cut to Hold at Jefferies; PT 2,100 pence
* Sparebanken Vest Cut to Hold at Arctic Securities; PT 100 kroner

>>> Initiation
* Nexus Rated New Outperform at Exane; PT 65 euros
* Petrofac Reinstated Buy at Goldman; PT 170 pence
* Wickes Rated New Buy at Panmure Gordon; PT 355 pence (+)

>>> Call
* Banco BPM Outlook Encouraging, Core Revenue Solid: Jefferies
* Leonardo 1Q Above Expectations, Outlook Confirmed: Deutsche Bank (+)

FT : AQR regains its mojo as Tiger swoons

AQR regains its mojo as Tiger swoons
Two of the hedge fund industry’s biggest players have seen a violent change in fortunes lately.

We’ve written a fair bit about the shitco carnage, how it’s infected even Big Tech and the damage it has inflicted on growth stonk jockeys like Cathie Wood and Chase Coleman. But some people are loving it at the moment.

Take AQR Capital Management, the investment group led by Captain America fan, former Gene Fama protégé and full-time angry Twitter person Clifford Asness.

Despite a hilariously furious online rampage against the London Metal Exchange earlier this year, Cliff seems to be having a pretty great 2022, that encapsulates a regime shift in markets that will be welcome to many frustrated value investors.


FT Alphaville hears that AQR’s Absolute Return fund — its longest-running and broadest strategy that wraps together a lot of other funds — gained another 8.3 per cent after fees in April, lifting its year-to-date gains to 29.7 per cent. That comes after a 16.8 per cent gain in 2021. A bevy of its other funds is also doing well, despite the current market mess.

Although there are no signs that success is mellowing out Asness whatsoever, it must be incredibly welcome. After growing massively thanks to swelling interest in quant investing in the wake of the financial crisis, things went “significantly crappy” for AQR from about mid-2018 or so. (Full disclosure, this article almost perfectly top-ticked it.)


AQR’s assets under management went into reverse, falling from a 2018 peak of about $226bn to under $140bn last year. Several rounds of job cuts followed. The long-only fixed income investment arm started in 2014 was axed last year, and half-dozen or so of AQR’s top partners have left or been jettisoned.

AQR remains pressure, with assets under management sliding further to $117bn at the end of March, according to people familiar with the matter. But at least performance has perked up noticeably.

AQR’s equity market-neutral fund gained another 7 per cent to take its returns net of fees to 19.5 per cent for the year. A similar strategy with a stronger value stocks tilt has returned 35 per cent so far in 2022. AQR’s long-short equity fund is up 14.4 per cent, its global macro fund has returned 21 per cent, and the AQR Managed Futures Strategy has gained 26.7 per cent.

FTAV can guess at the secret behind this renaissance: an initially near-terminal decision to “sin a little” and tilt some of its strategies towards value stocks back in November 2019. Whoops.


When the pandemic almost immediately compounded an already multi-century record-smashingly bad run for value stocks it looked like a cataclysmic error. But today it probably helps explain why AQR is doing well despite rocky markets.

As the chart above shows, the flipside to the value renaissance is the collapse of growth stocks, after utterly dominating the post-financial crisis bull market.

What we are seeing now is a dramatic regime shift in what works in markets, triggered by the resurgence of inflation and central banks beginning to tighten monetary policy. The best example of how abrupt the change has been is Chase Coleman’s Tiger Global.

A year ago it was basking in adulation after having made over $10bn in 2020, making it the highest-grossing hedge fund in the industry according to LCH Investments. Coleman reportedly personally netted $2.5bn that year. Institutional Investor wrote a profile on “How Chase Coleman Became a Hedge Fund Legend”.

Today things look a little different. Tiger Global’s hedge fund lost 43.7 per cent between January and the end of April, which in dollar terms is probably one of the biggest hedge fund losses in history, as we wrote earlier this week.

Still, whether AQR continues to bounce or Tiger manages to stage a comeback (and given how tech stocks are puking again, it’s looking grim), the violent shift in fortunes for two of the hedge fund industry’s biggest players is a killer example of how fickle financial markets are. Yesterday’s dunces are tomorrow’s savants, and vice versa.

FT : Xi Jinping’s renewed commitment to zero-Covid rattles markets in China

Xi Jinping’s renewed commitment to zero-Covid rattles markets in China
Tech stocks and renminbi slip as Beijing refuses to change course despite economic pain

Xi Jinping has reaffirmed his commitment to China’s controversial zero-Covid strategy, warning against “any slackening” in the effort and vowing to crack down on criticism of the policy despite signs of damage to the economy.

The comments were published by state media after a meeting on Thursday of the Communist party’s politburo standing committee, the country’s most influential political body that is chaired by the president.

“Our prevention and control policies can withstand the test of history, our measures are scientific and effective. We have won the battle to defend Wuhan, we can also win the battle to defend Shanghai,” the statement said.

The direction set by China’s top political organ bucks rising domestic and international criticism amid a series of lockdowns that have confined tens of millions of people to their homes across the country in an effort to stop the spread of the Omicron variant.

Ting Lu, Nomura’s chief China economist, noted that the politburo “did not mention” reconciling China’s focus on eliminating the virus with economic growth or minimising the damage to the economy, unlike previous meetings.

Xi’s high-profile endorsement of zero-Covid compounded the drag on markets, with global investors dumping stocks on concerns over the impact of future rate rises by the US Federal Reserve.

Chinese tech stocks that are heavily exposed to domestic consumer activity were among the hardest hit, with Alibaba tumbling more than 7 per cent and Tencent falling more than 5 per cent.

China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks shed as much as 2.5 per cent, while in Hong Kong the benchmark Hang Seng index was down as much as 5.5 per cent.

“Market sentiment is still fragile,” said Dickie Wong, head of research at Kingston Securities. “The pandemic, the situation in Shanghai, it’s not over yet — although the Chinese government will do whatever they can to support the domestic economy.”

The renminbi also lost ground, dropping 0.3 per cent to about Rmb6.68 per dollar and leaving the currency down almost 5 per cent for the year to date.

The market moves came a day after data for April showed that China’s services sector suffered its second-worst contraction since the start of the pandemic, as lockdowns restricted movement in the world’s largest consumer market.

Goldman Sachs data showed that the proportion of cities with districts considered at mid- to- high-risk of lockdowns contributed about 10 per cent of China’s gross domestic product.

Vaccination rates, meanwhile, have fallen to about 1.5mn doses per day over the past week from 5mn in recent months, as health officials have been forced to divert personnel and resources to mass testing campaigns, Goldman said.