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

Over the past three months, Bank of America, JPMorgan Chase, and Citigroup have markedly reduced their exposure to Russia.

May 18, 2014 at 9:45AM

G

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%.

Bank

1Q14

4Q13

Change

JPMorgan Chase

$4.7 billion

$5.4 billion

(13%)

Bank of America

$6.3 billion

$7.6 billion

(17%)

Citigroup

$9.4 billion

$10.3 billion

(9%)

Total

$20.4 billion

$23.3 billion

(13%)

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.

Protect your portfolio
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That’s beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor’s portfolio. To see our free report on these stocks, just click here now.

John Maxfield has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Bank of America. It owns shares of Citigroup and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers