Investment operations at big three US banks most at risk in Europe
With the European debt crisis capturing the market's attention, analysts at Sterne Agee say three of the nation's largest banks — Citigroup (C), JPMorgan Chase (JPM) and Bank of America (BAC) — have billions of dollars exposed to European banks and debt. Analysts Todd Hagerman and Robert Green said the investment banking operations of the U.S. banks are most at risk in Europe because of the gyrations of the overseas debt markets and "potential inability to undertake fixed-income underwriting." Still, European investment banking revenue exposure for theses domestic banks is "fairly low," representing about 3% to 4% of consolidated revenue, according to the Sterne Agee analysts. And retail banking operations in the euro zone for the American banks remains "very limited," the analysts said. "The international push for the big three tends to be focused on developing/emerging markets — mostly Southeast Asia/Pacific Rim/Latin America," they said. Citi's exposure to Greece, Ireland, Italy, Portugal, Spain as well as other financial institutions and corporations located in Europe sit at roughly $13 billion. "From an operational standpoint, Citi has the most overseas exposure of anyone in our group, with roughly 50% to 60% of revenues non-U.S. based, both on the corporate and consumer side," Hagerman and Green said. JPMorgan Chase's aggregate net exposure to Greece, Portugal, Spain and Italy currently stands at about $14 billion, according to Sterne Agee, with the bank's total credit exposure sitting at $121 billion. "Sovereign exposure in all five countries represented approximately 26% of the aggregate net exposure, with the majority of the sovereign exposure in Spain," the analysts said. Bank of America's revenue exposure lies predominantly in its investment banking business, the analysts noted. "Roughly 40% of fixed-income currency and commodity sales are non-U.S., but Bank of America is not a top 10 player in Europe," they said. Write to: Kerri Panchuk.