Banks in talks with distressed buyers on Russian assets

Banks are having conversations with potential buyers on how to get rid of their exposure to Russian corporate loans, but sanctions fears and pricing uncertainty are limiting trading activity and the ability of buyers to act, several banking sources said.

Punishing Western sanctions on Moscow in the aftermath of its invasion of Ukraine have prompted some distressed debt buyers to approach banks holding Russian loans to sound out their appetite to potentially sell that exposure at a discount, two bankers said.

Another banker said he had an opportunity to buy some Russian companies' loans but dismissed the offer because of fears that more sanctions could further limit the ability to recover value.

The discussions, though tentative, highlight foreign banks' uncertainty on how to manage their exposure to Russia, which according to Bank for International Settlements data is to the tune of $120 billion.

Banks tend to hold loans in their portfolios, only selling down their exposure quietly through bilateral transactions as they do not want to be seen as dumping the paper in the market.

One of the sources said he was approached by distressed debt desks at two US banks last week to discuss any potential interest in selling loans, but he said he was sceptical talks would lead anywhere.

"I think they might say they're interested, it's exciting for distressed markets, but I think we're some way off from seeing any real liquidity," the banker said, speaking on condition of anonymity as the talks are private.