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Brexit effect on Bank Stocks

Nasir Mohammad | Jun. 27, 2016
Brexit effect on Bank Stocks

27 June, AtoZForex – The fallout of Britain’s decision to leave the European Union continues to reverberate through global markets, as we observe the Brexit effect on bank stocks. Not just that, the Brexit decision has thrown the country’s political stability into shambles. As expected, the European markets opened to broad losses on Monday, while the pound plunged as much as 2% in early trading hours and still falling.

George Osborne calms market

In a bid to calm the frantic atmosphere, UK finance minister George Osborne gave a speech on Monday morning, clarifying that the volatility in the financial market is likely to continue, but the government had spent the "last few months putting in place robust contingency plans for the immediate...aftermath" of the result. Also adding that they had in place "further well-thought-through contingency plans" if needed but said there will be an "adjustment in our economy".

IMF warns

The Brexit decision has led to a ton of controversy, after many global grade organizations, analysts and leaders had warned of the potential disastrous effect of such a decision. The International Monetary Fund (IMF) is one of many organizations who fervently warned against a Brexit. Leading managing director Christine Lagarde, condemn the decision. She said about Friday’s sharp financial market selloff – which wipped about $2 trillion dollars out globally – that financial markets had "vastly underestimated" the outcome of the referendum. The IMF chief further stated that:

"At this point in time, policy makers both in the U.K. and in Europe are holding that level of uncertainty in their hands," Lagarde said on Sunday. "How they come out in the next few days is going to really drive the direction in which risk will go."

Brexit effect on bank stocks

Several banks have publicized warning notes as regards the effect of a Brexit. With many downgrading U.K. stocks and warned of the sectors most vulnerable to the effects of a Brexit. Citigroup opines that banks are one of the most exposed sectors to Brexit, especially the U.K.'s domestic lenders. Also adding that Citigroup that European investment banks were also at risk. With Deutsche Bank and UBS among major investment banks to receive a price-target cut from Citigroup, sending shares in both lower.

The effect is apparent on British bank stocks with  Barclays down around 11 percent and Royal Bank of Scotland dipped over 14.1 percent after receiving unfavorable outlooks from brokers. Credit Suisse stocks also hit a new low of 10.74 swiss francs.

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