American Banks Are Secretly Preparing for a Russian Takeover of Eastern Ukraine

In 1815, an agent of the Rothschild banking dynasty is rumored to have foretold Wellington's victory over Napoleon at the Battle of Waterloo. After racing across the English Channel, the man informed his boss, Nathan Rothschild, who then went immediately to the London Stock Exchange to magnify the family's already-considerable fortune.

Whether or not this story is true, it's since fueled the perception that bankers have their fingers on the pulse of geopolitics more than even many governments. This is why investors may find it notable that America's three biggest banks are aggressively scaling back their exposure to Russia just as the Eurasian power appears disposed to annex the eastern half of Ukraine.

You can see this in the table below, which compares the total exposure of the nation's three largest banks to Russia over the past two quarters. In sum, Russia-related assets at JPMorgan Chase (NYSE: JPM  ) , Bank of America (NYSE: BAC  ) , and Citigroup (NYSE: C  ) have declined over this stretch by $2.9 billion, or 13%.





JPMorgan Chase

$4.7 billion

$5.4 billion


Bank of America

$6.3 billion

$7.6 billion



$9.4 billion

$10.3 billion



$20.4 billion

$23.3 billion


Source: Company filings.

"Russian intervention in the Ukraine during the first quarter of 2014 significantly increased geopolitical tensions in Central and Eastern Europe," Bank of America noted in its latest quarterly report. "The situation remains fluid with potential for further escalation of geopolitical tensions, increased severity of sanctions against Russian interests, and possible Russian counter-sanctions."

"Russia's engagement in recent events in Ukraine (as discussed under Ukraine above) has been a cause of concern to investors in Russian assets and parties doing business in Russia or with Russian entities," observed Citigroup. "Citi continues to monitor the potential implications of any adverse developments relating to Russian business, trade or investment, and will attempt to mitigate its exposures and risks relating to Russia as appropriate."

Meanwhile, JPMorgan Chase shared only that it is "focused on the economic impact of this situation to Russia's financial condition, possible potential for contagion effects, and the impact that any potential sovereign downgrades or credit deterioration would have on the Firm's credit portfolio, the allowance for loan losses and overall risk exposures."

While I can appreciate a good conspiracy theory as much as anyone, I don't believe there's anything to read between the lines here. In short, banks are fiduciaries tasked with the responsibility of managing the cumulative assets of their clients -- obviously, some are better at this than others. It accordingly follows that any U.S.-based bank would be prudent to reduce exposure to a country like Russia that's fueling the ire of the American government.

The point being, while it's worth pointing out that banks are reducing their exposure to Russia, it seems like the impetus is to avoid additional risk as opposed to sprinting headlong toward it.

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John Maxfield

John is The Motley Fool's senior banking specialist. If you're interested in banking and/or finance, you should follow him on Twitter.

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