Declines in rouble and oil put pressure on Abu Dhabi overseas investments

Aabar's UniCredit stake hammered amid collapse of Russian rouble but bank CEO discounts writedowns.

Some of Abu Dhabi’s international investments are coming under pressure from the fallout in global markets led by the collapse of the Russian rouble and a decline in oil prices.

Shares of UniCredit, Italy’s biggest bank, in which Aabar Investments has a 6.5 per cent stake, has dropped almost 14 per cent this month. It is the second biggest foreign lender in Russia after Société Générale of France.

The shares were down 2.08 per cent at €5.17 in afternoon trade on Wednesday.

Still, while UniCredit has been hurt by the collapse of the rouble, down 50 per cent against the dollar this year, the lender’s chief executive has ruled out any writedowns as a result of currency hedging.

“The rouble’s decline isn’t having an impact on the Russian unit because its assets are denominated half in roubles, with most of the remainder in dollars,” Federico Ghizzoni said at a press conference in Milan on Wednesday, according to Bloomberg News.

Mr Ghizzoni excluded write-downs in the fourth quarter and next year and said profit in Russia for 2014 should be in line with or “slightly better than expectations”.

UniCredit’s Russian unit posted a €117 million (Dh535.1m) profit in the third quarter, up 2.6 per cent on a year earlier.

The subsidiary, which is not experiencing withdrawals, began reducing lending to Russian clients several months ago to avoid a credit quality deterioration. UniCredit also hedged more than 50 per cent of its anticipated Russian profit at the start of the year, Mr Ghizzoni said.

Russian lenders are braced for increasing threats the country’s economy, already on the brink of recession, after the central bank announced the largest rate increase in 16 years this week as oil fell below US$55 a barrel and the rouble posted its biggest drop since 1998.

The rouble plunged to 80 a dollar for the first time on Tuesday as the rate hike failed to revive investor confidence in the currency.

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Published: December 17, 2014 04:00 AM


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