British banks' earnings per share will take a 15% to 25% hit if the U.K. leaves EU without a deal in place. The anticipated economic downturn, loan defaults and lower interest rates would contribute to the loss, Reuters reported, citing a Citigroup Inc. research note.
However, analysts at the Wall Street Bank said that the U.K.'s larger lenders, including Standard Chartered PLC, Barclays PLC, HSBC Holdings PLC, Lloyds Banking Group PLC and Royal Bank of Scotland Group PLC would see a more "muted" impact on their shares from a no-deal Brexit, the report said.
There have been few indications that Brexit has affected the British banking sector, aside from a decline in confidence among business and retail customers, Reuters noted.
According to S&P Global Ratings, British banks can cope with uncertainties around the U.K.'s divorce with the EU, but their profitability is under pressure from tough competition in the mortgage sector, narrowing interest rates, weakening loan demand and slowing growth prospects.
Ratings also believes that the smaller British lenders will face greater pressure in a no-deal scenario than banking giants like HSBC because of their business focus on retail banking and property-related lending.
