Western banks face Russian triple whammy

Western executives watched with horror as Russian tanks rolled into Ukraine on Thursday. Bank bosses like Frédéric Oudéa of Société Générale and UniCredit's Andrea Orcel have more to fear than most.

The 8 per cent fall in the STOXX Euro 600 Banks Index on Thursday and a 3 per cent decline in share prices of American lenders like JPMorgan reflects a triple whammy of risks.

The selloff is partly down to a gloomier economic outlook. A protracted conflict could push up energy and food prices, dampen consumer confidence and slow the pace of central-bank rate hikes. Money market prices suggest investors now think the US Federal Reserve is less likely to raise policy rates by 50 basis points in March. Delays would postpone a much-anticipated windfall for Western banks, whose lending margins improve with higher interest rates.