Brexit has had an impact on the global stock market, causing volatility around the world. Countless sectors have struggled as a result, but the banking sector has been the hardest hit thus far.
The KBW Bank Index in the United States tracks 24 large-cap banks and has fallen 11.2% since Brexit. Bank of America (BAC) stock has suffered, too, down 12% since Brexit. The banking sector is down almost 100% more than the general markets. The S&P 500 has dipped 5% since Brexit, too.
Uncertainty on the global scale is a major factor behind bank stocks tumbling. Revenue and investment banking fees are down, too, due to volatility and banks slumping, which is making matters worse for the sector. Confidence from the business sector is down, weighing on the market even further.
Britain’s exit from the European Union didn’t include an exit plan, and with several officials leaving their posts, it’s leading to uncertainty for markets across the globe.
Loan demands are down as businesses are unsure of where to go from here. Investing in operations in Britain and the EU as a whole is on hold for many businesses as they await a stabilized market and a plan from Britain on how the country will exit the EU.
A higher dollar is further impacting the market. The sterling is near 30-year lows as the yuan and euro have fallen. The yen is the only currency to increase relative to the dollar, which will cut into bank revenues, too.
Banks are suffering headwinds also due to the Federal Reserve not raising interest rates. Loan portfolios are a major part of bank revenue, and Brexit has caused the chance of the Fed raising interest rates further to shrink. The end result puts pressure on banks to maintain revenue as profits from loans are stagnant.
Uncertainty also looms over banks, as many operate out of London and will need to move into the European Union following Brexit. This will cause higher expenditures that eat into bank profits.
A look into banks since Brexit shows the following:
- HSBC Holdings (HSBC) is down nearly 10% since Brexit.
- Barclays (BARC) is down 28.58% since Brexit.
- Royal Bank of Scotland (RBS) is down 44% since Brexit.
These are the leading banks in the United Kingdom, and they’ve all suffered sustained losses since Brexit with short-term rebounds.
