U.S. Bank Hit By Russia Losses

In the first public indication of the effect of Russia's economic troubles on U.S, banks, Republic New York Corp. said Thursday that losses from investments in Russia would wipe out its third-quarter profits.

The nation's 18th-largest bank said it will take a third-quarter charge against profits of $110 million to cover losses in Russia, and take an additional $45 million from earnings to put aside for potential defaults of Russia loans.

"As a result of this action," Republic said in a statement, "Republic anticipates that its earnings for the third quarter will be substantially eliminated."

The announcement sent Republic's shares tumbling $4.62@1/2 to $45.50 in late morning trading on the New York Stock Exchange.

Republic said it wrote down its investments in Russia to 15 cents on the dollar, in keeping with Russia's write-down of its own government bonds to 15 cents on the dollar earlier this week.

"Absolutely, it's material," said Marni Pont, a bank analyst at Keefe Bruyette & Woods. "Republic's perception in the market is that of a very risk-averse institution, and I do believe they have a very strong risk management philosophy. But the market's moved so quickly and so fiercely against them. It is something of a black eye in terms of risk management."

The bank holding company earned $119 million in the second quarter of this year and $112 million in the third quarter of last year.

David Berry, a bank analyst at Keefe, Bruyette, said Republic has about $300 million in loans out to Russia.

Other big U.S. banks have about the same amount of money at risk. But because Russia loans are a much smaller part of their portfolios, they will be less adversely affected, Berry said.

Berry estimates that Citicorp, for example, has about $300 million in loans to Russia. But it earned $1.1 billion last quarter.

Written By Patricia Lamiell