Russia's invasion of Ukraine is creating unpredictable reverberations for U.S. banks even though first-order exposures to the crisis seem limited overall.

JPMorgan Chase & Co. said severe market turbulence means it will not provide further guidance on trading for the first quarter, and the bank is reportedly a big counterparty to a large nickel producer whose wrong-way bets helped trigger a suspension in trading of the metal. Citigroup Inc. said its operations in Russia could lead to sizable losses.

But while the hits could be painful, the sums thought to be at risk so far do not appear destabilizing on their own, analysts said.

As of late last year, U.S. banks' collective exposure to Russia was smaller than to countries including Finland. An S&P Global Market Intelligence review of the 30 largest U.S. banks that have filed Form 10-Ks found that just three disclosed Russia exposures individually.

The modest direct linkages are a legacy of a Russian economy that had become increasingly isolated even before the most recent hostilities, as sanctions imposed on Russia in 2014 after its annexation of Crimea forced foreign banks to pull back and Russia used trade surpluses to build up an enormous, defensive stockpile of foreign reserves.

Citi said it could absorb losses equal to about half its $9.8 billion exposure to Russia under a worst case scenario. The bank had already been seeking to sell its consumer operations in the country and is now winding down other business lines there too.

Significant exposure at Citi

A loss of $4.9 billion would amount to a little more than Citi's quarterly average net income of $4.42 billion since 2018, an overhang analysts said could restrain share repurchases.

Goldman Sachs Group Inc., which is also exiting the country, disclosed that it had about $650 million of credit exposure to Russia at the end of 2021. The smallest country exposure JPMorgan Chase disclosed was to Mexico at $4.9 billion.

Declining linkages

Foreign banks' claims on Russia have declined precipitously since 2013, according to data from the Bank for International Settlements, dropping by about half to less than $125 billion as of late 2021.

The decline has also been sharp for U.S. banks, with aggregate exposure dropping from $26.61 billion in the third quarter of 2014 to $14.84 billion in the third quarter of 2021.

The amount is small relative to an industry with about $22 trillion in assets, and even less than the countrywide exposure to Russia at substantially smaller European economies.

Second-order effects

To be sure, direct exposures do not give a complete picture.

In a March 2 congressional testimony, Federal Reserve Chairman Pro Tempore Jerome Powell noted that damage could emerge through other channels.

"It would need to be a second-order thing where a foreign financial institution has exposures to Russia but also exposures to our banks," Powell said. "We don't see that as a primary risk, but it is something we're watching."