Saying goodbye has been easier than leaving for big U.S. banks trying to exit Russia.

U.S. banks' total exposure to Russia climbed to $9.40 billion in the third quarter of 2022 from $8.88 billion in the first quarter, according to the most recent industrywide data compiled by S&P Global Market Intelligence. A buoyant ruble, despite international sanctions, has worked against a reduction in the overall figure, although disclosures by individual banks show meaningful progress.

When Russia invaded Ukraine in February 2022, U.S. banks already were in retreat. They had pulled back considerably from Russia because of sanctions imposed after its 2014 annexation of Crimea. Their exposure to Russia stood at $16.01 billion in the fourth quarter of 2021. Still, what is left could produce painful losses as U.S. banks — like more critically exposed European counterparts — wrestle with a far tougher sanctions regime and seek sales under duress that may not secure Russian President Vladimir Putin's approval.

That is especially true for Citigroup Inc., the globally focused U.S. bank with the largest disclosed exposure to Russia. Citi has observed that expropriation would mean a write-off of its net investment in Russian subsidiary, AO Citibank, and intercompany liabilities AO Citibank owes to other Citi units. The bank estimated that the capital impact under a severe scenario would be about $2.0 billion.

Crunching down

The $2.0 billion figure at Citi is much better than the stress scenario hit of closer to $5 billion it estimated about a year ago. Before the February 2022 invasion, Citi had already decided to sell its retail operations in Russia as part of a broader withdrawal from consumer markets globally. It currently plans to end nearly all its institutional operations by the end of the first quarter of this year.

The bank says it has stopped soliciting new business and clients in the country. It reported that its loan exposure in the country has fallen to $600 million at the end of 2022 from $2.9 billion at the end of 2021, reflecting paydowns and the sale of consumer loans to a Moscow-based bank.

However, cash at the Russian central bank was up year over year to $2.4 billion from $1.0 billion, and its net investment in the country was about flat at $1 billion. An expropriation would also entail a recognition of currency translation adjustment losses through earnings, the bank said. Citi has not yet been able to take any freed-up capital out of the country, a spokesperson said.

Goldman Sachs Group Inc. reported its exposure to Russia had fallen to $205 million at the end of the 2022 third quarter, from $650 million at the end of 2021, and it did not report a figure for the end of 2022, saying it had curtailed its Russian operations to those needed to meet legal and regulatory obligations. The bank reportedly transferred some of its investments to former employees in 2022.

* Set email alerts for future data dispatch articles. * Download a template to generate a bank's regulatory profile. * Download a template to compare a bank's financials to industry aggregate totals.

Client money piles up

Overall, Citi reported that its Russia exposure had fallen to $7.5 billion at the end of 2022 from $9.8 billion the prior year. Some of the progress it made was offset in the 2022 fourth quarter by an increase of $1.8 billion in exposure reflecting dividends it received as a custodian that it could not pass on to clients "due to restrictions imposed by the Russian government." These balances do not impact Citi's potential capital impact.

Other big banks also reported pileups of client money in Russia during the 2022 fourth quarter. JPMorgan Chase & Co. said it had $500 million worth of Russia exposure, down from $650 million in the 2022 first quarter, but that the figure excludes client deposits at the Russian National Settlement Depository.

State Street Corp. said that at the end of 2022 it had about $1.3 billion in accounts in Russia, including through a subcustodian and Western European-based clearing agencies, where its access might be inhibited by sanctions or government intervention.

State Street said it evaluated the money as a part of its credit loss allowance, which increased just $13 million from the year prior to $121 million.