LONDON (Reuters) – Britain’s banks face a hit of up 25% to their earnings if Britain crashes out of the European Union without a deal, analysts at Citigroup <C.N> said in a research note.
The economic slowdown that would result from a no-deal Brexit, as well as the likelihood of lower interest rates and borrowers defaulting on loans, would hit earnings per share by between 15 to 25%, the analysts at Citi wrote in the note published on Thursday.
The research is one of the most concrete assessments yet of the impact of no-deal on Britain’s banking sector, which has thus far shown few signs of the impact of Brexit other than declining confidence among business and retail customers.
Royal Bank of Scotland <RBS.L> on Aug. 2 said deteriorating economic conditions before Brexit were likely to derail next year’s profitability, and that some customers were already struggling.
The impact of a no-deal scenario on the shares of big British lenders Barclays <BARC.L>, HSBC <HSBA.L>, Lloyds <LLOY.L>, RBS <RBS.L> and Standard Chartered <STAN.L> could be more muted, the Citi analysts said, as the risks of that outcome are already partly priced in.
The FTSE index of banks in Britain <.FTNMX8350> has fallen 7% this year, as lenders grapple with pressure on profits from competition in the mortgage sector, ultra-low central bank interest rates and high fixed costs.
(Reporting By Lawrence White. Editing by Jane Merriman)