15 June 2016

The Guardian: Bank shares would fall sharply after Brexit, City analysts warn

The banking experts at investment management and research group Bernstein said Barclays would be hardest hit, falling 40% over 18 months. The bank has the highest exposure to London and the investment banking sector, which the Bernstein analysts said would suffer a “tank” in revenues.

The share prices of the two bailed-out banks – Lloyds Banking Group and Royal Bank of Scotland – could take a hit of 35% and 25% respectively, according to the analysts’ research.

Bernstein predicts rising unemployment, a slide in sterling and falling house prices in the event of a decision to leave the European Union.

The well-regarded City firm said it was publishing the research because of market movements as a result of bookmakers upgrading the likelihood of the UK leaving the EU from 25% to 40%.

Earlier this week, analysts at Jefferies concluded that Barclays’ shares had the most to gain from a remain vote – and most to lose from a leave vote. “Barclays is the most geared to the outcome of the referendum based on our analysis. We retain a buy on Barclays and note that its fundamentals are also likely to be the most directly impacted by the referendum result, given a large investment bank and broad corporate banking presence,” the Jefferies research team said.

The Bernstein analysts do not expect banks to have to embark on significant cash calls in the way they did after 2008. 

Referring to the global financial crisis caused by the 2008 banking crash, the Bernstein analysts said: “The UK banks today hold the highest level of capital in their history – helped by a regulatory push post the global financial crisis to counter the very real risks that Brexit brings.”

However, the analysts said dividend payouts to shareholders would be “toast”. [...]

Full article on The Guardian

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