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Brexit Repercussions Hit UK-Exposed Banks, Tank Share Prices

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After Britain’s decision yesterday to leave the European Union, there is a huge amount of uncertainty looming over global markets, and especially over the banking sector.  Many banks, both European and from the US, use the United Kingdom as their headquarters for the services and operations that they offer throughout the rest of Europe. With the UK’s exit from the EU, there will likely be new regulations and rules that could have negative effects on transactions across borders.

As global markets and investors react to the Brexit vote, these banking stocks are especially getting hammered today, as the shroud of uncertainty looms:

Barclays PLC (BCS - Free Report)

Barclays is one of the banking stocks that is taking a major beating today, as its stock has been trading around 20% lower since the market opened. BCS is down year-to-date more than 30% now, and the uncertainty surrounding the Brexit is not going to help its share price moving forward.

In an attempt to reassure workers that Barclays will move forward through the Brexit, CEO Jes Staley released a statement in which he said “Barclays has stood in service of our customers and clients for over 325 years. We have been here for them through equally profound changes before. And no matter what has been laid before us, we have been here to help achieve their ambitions”.

Though taking a major hit today, Barclays remains confident in its ability to serve its clients moving forward, though the uncertainty created by the Brexit certainly represents an obstacle the bank will need to overcome.

Royal Bank of Scotland Group PLC RBS

Down more than 22% today, the Royal Bank of Scotland Group PLC is certainly feeling major effects of the Brexit, though it was being affected from the uncertainty of the event for quite some time. RBS is down more than 34% year-to-date, has cut more than 2,500 jobs since January, and recently announced that the bank plans to cut 900 more in cost-reducing measures.

Being headquartered in the United Kingdom, RBS does majority of its business in the area, which means the bank will be incredibly vulnerable to the effects of new rules and regulations that are likely to be put in place. RBS was already having a rough 2016, and the uncertainty the bank faces moving forward is not likely to be any type of positive.

Deutsche Bank DB

Headquartered in Frankfurt, Germany, Deutsche Bank is another bank stock that is getting hammered today. DB is down more than 16% on the day, and down around 39% year-to-date. The bank also announced today plans for a restructuring for the revamping of its commercial and private banking services in Germany.

DB said it will be eliminating 3,000 employees in Germany by 2018, and consolidating its offices from the 723 branches it has now to 535 larger offices in 2017. Though the restructuring doesn’t stem from the Brexit decision, it does show that the bank was already struggling and trying to reduce costs, and further regulations and costs it may face in the near future will certainly complicate things.

JPMorgan Chase & Co. JPM

Though its headquarted in New York, JPMorgan Chase & Co. is still being affected by the Brexit decision because of exposure it has to the area, with the company’s stock dropping nearly 5% today. JPM is now down nearly 8% year-to-date, as 2016 has not been a great year thus far.

CEO Jamie Dixon and other top executives for the bank released a statement too to reassure its employees, as it recognized that the bank will face challenges from the Brexit, adding that the bank may seek to change its legal structure and its geographic positioning to comply with new regulations that are likely on their way.

Bottom Line

Though leading up to the Brexit vote the “leave” and “stay” sides were relatively even in terms of voters, the “leave” party winning still shocked many throughout the world and the global markets. The banking sectors is one of if not the hardest hit group by the decision, as they will likely face new regulations in the area, in addition to the relative uncertainty the Brexit is casting over the area and markets across the globe.

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