bne IntelliNews -

The European Bank for Reconstruction and Development (EBRD) looks set to report its first loss since the 2008-2009 global credit crunch becaue of the twin crises in Russia and Ukraine, EBRD Vice President Andras Simor told media on January 15. The loss would be the EBRD's sixth ever loss since being founded in 1991. 

The Russia-Ukraine twin crises of 2014 have hit markets comprising €8.5bn of EBRD investments - €5.8bn in Russia, its largest market, and €3bn in Ukraine, its third largest market after Turkey.  One quarter of overall EBRD exposure is to Russia, and 10% to Ukraine.

"We will probably end up with a loss at the end of the year (2014)," Simor said in an interview with the Moscow Times. "But that is exclusively down to valuation [of the Russian equity portfolio] and provisioning," he added. The bank said it had otherwise made a "large realised profit in 2014".

"The devaluation of the ruble has hit the value of our equity portfolio and we have to accept that," said Simor. "Our role is not only to be there when the sun shines, but also in the storms." Simor said that the 35% drop in the ruble against the euro since the start of 2014 would be "a good guide" for the losses its Russian equity portfolio was likely to have suffered, as quoted by Moscow Times.

Both the ruble and Ukraine's hryvnia have experienced massive devaluation, with the Ukrainian hyrvnia devaluing by 85% in 2014, according to the World Bank. Ukraine has been hit by revolution, civil war in the east and the Russian annexation of Crimea, while Russia has been hit by a plunge in the price of oil, and Western sanctions.

The EBRD cut its lending in Russia by two-thirds in 2014, to slightly over €600mn from €1.8bn in 2013, and it is not considering any new projects, because of  EU countries' opposition to Russia's policies in Ukraine.