Barclays, RBS, Lloyds Slammed by Second Day of Brexit Fallout
June 27, 2016 20:39 GMT
Barclays PLC (NYSE:BCS) is one of the British banks hit the hardest by last week’s historic Brexit vote, with its shares trading 37 percent lower than the stock’s price before it was announced that the United Kingdom would leave the European Union. The unexpected voting results immediately sent global markets into a chaotic state of volatility, and British banking groups – in particular – took the blunt of the impact.
The main sell-offs in the market on Friday, and continuing into Monday, are in the European financial sector – and Britain’s big banks are getting the worst of it. Both Barclays and Royal Bank of Scotland Group Plc (NYSE:RBS) had their stock halted today, after the banks’ shares dropped to their lowest levels since the financial crisis. Once their shares fell more than eight percent, circuit breakers were triggered to stop all trading of the common shares.
Barclays is down 21 percent since the market open today, RBS is down by 12 percent and Lloyds Banking Group plc (NYSE:LYG) has plunged by 18 percent. Despite the various British banks’ stock gaining in value in the days leading up to the surprising vote, the voters’ decision drove the market values of these giant financial institutions 13 percent lower – on average – in a matter of days.
At least six Wall Street analysts have slashed their ratings on the three banks mentioned above. Jefferies, for instance, cut its earnings prediction for Barclays, RBS and Lloyds into 2018, expecting “tectonic plate shifts in European bank investing.” Jefferies’ Joseph Dickerson, while not giving any predictions on the details of these shifts, said that the current state of uncertainty about Britain’s future “creates an information vacuum and is likely to impair investment appetite in the U.K.”
U.K. banks were not the only ones touched by the ripple effects of the historic Brexit. Deutsche Bank (NYSE:DB), Germany’s universal banking giant, is down six percent. Switzerland-based Credit Suisse (NYSE:CS) is trading nearly nine percent lower today, and UBS (NYSE:UBS) – also a Swiss banking group – has dropped by more than eight percent since the market open this morning.
The hysteria surrounding the Brexit can be felt almost everywhere. European stock indexes dropped yet again today. The FTSE 100 fell by over three percent, and major averages in Germany, Italy and France sunk by more than two percent. The sell-off was not contained within Europe, however, as the DOW is down 1.65 percent and the S&P 500 has tumbled by just under two percent.
The impact on the British pound (GBP) is also a major factor in the beating that British banks have taken since the Brexit results sunk in. The UK’s currency has dropped another four percent to just $1.32 today. According to George Soros, who forecasted a drop in the value of the GBP if the voters approved leaving the European Union, is warning that the whole EU is going to unravel.
Some, however, are embracing a calmer outlook. The British Chancellor of the Exchequer, George Osborne, attempted to reassure Britons as the hectic market absorbed the Brexit announcement. In his first remarks after the voting results came in, Osborne said today: “You should not underestimate our resolve. We were prepared for the unexpected.”