Britain's banks face 25% earnings hit from no-deal Brexit -Citigroup


LONDON:
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 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 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, HSBC, Lloyds , RBS and Standard Chartered 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 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.





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