27 October 2016

Bloomberg: Danish ATP fund sees London banking ‘dismantled’ by Brexit

If the U.K. gives up its membership of the European Union’s single market, with all that such a scenario entails, “it has implications for us in many ways,” Carsten Stendevad, the CEO of ATP, said in an interview in Copenhagen on Tuesday. There’s the general spillover into the economy. But there’s also the specific risk to investors that need to deal with banks operating in London to execute transactions, he said.

“As a big investor we rely on strong counterparties,” Stendevad said. “The financial industry has a track record of passing on new costs to their clients and we’re a key client.”

The fallout of the June 23 referendum is already palpable, he said. “We’ve already felt the impact of a lot of the changes in the financial industry on our business model, and this will very much weigh on the profits of banks.”

ATP has assets of about 806 billion kroner ($118 billion). The fund returned 12.3 percent over the first nine months, a level Stendevad says probably isn’t sustainable given the outlook. In connection with ATP’s third-quarter results, he pointed to the extreme monetary policy environment and Britain’s departure from the EU as two key concerns that will make investing harder. [...]

“From my vantage point, we see a situation where London has started to plan for a hard Brexit,” he said. “That means there’s not a lot of time and I wouldn’t be surprised if we start seeing more banks taking very near-term steps.”

Stendevad says London’s banks are working to try to ensure they can keep operating in the EU in a post-Brexit world. At the same time, “a number of activities will no longer be profitable in Europe,” he said.

The ATP executive said he expects some financial firms to leave Europe altogether, “and that’s bad for the European financial industry.” What was a “highly effective” industry in London “is now being dismantled,” he said.

Full article on Bloomberg

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