Brexit is a highly discussed topic, but I would like to specify its influence on UK banking sector. As someone said Brexit is “a leap into uncertainty”. This thesis has been improved by today’s trading activity in the market. Top 5 UK banks have plunged steadily: Lloyds, Royal Bank of Scotland, Barclays, Standard Chartered and HSBC are down 25%, 23%, 22% 10%, 8% respectively. We may conclude that the vote to leave the EU was a real surprise to the market. I have filtered out major financial news on these banks and can summarize that there are 5 main reasons of such plunge:
1. Expected decline in house prices by by 10-18% (will influence such banks as Lloyds with big asset allocations in mortgages);
2. Increase in non-performing loans which will be led by pound depreciation;
3. Possibility of rate hike to the monetary shock;
4. Insertanty in trade terms with EU;
5. A threat of a next big recession.
I would like to hear your opinions on the topic. Is market overpriced above treats and this is a good time to pick up banking sector assets or this is only begining of further contraction?
1. Expected decline in house prices by by 10-18% (will influence such banks as Lloyds with big asset allocations in mortgages);
2. Increase in non-performing loans which will be led by pound depreciation;
3. Possibility of rate hike to the monetary shock;
4. Insertanty in trade terms with EU;
5. A threat of a next big recession.
I would like to hear your opinions on the topic. Is market overpriced above treats and this is a good time to pick up banking sector assets or this is only begining of further contraction?
How Brexit influences UK banking sector?
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