Since Brexit, we have all been debating the impact that leaving the EU is going to have on businesses, not only in the UK but also across the world. We have already seen the detrimental impact that Brexit has had on banks in the US and Europe. The day after the UK voted to quit the European Union, shares in big overseas banks fell from seven to 20 percent. Of course, a lot of this was due to uncertainty, and segments of the market have recovered. However, there is no denying that Brexit will continue to have an impact on foreign banks, and below we take a look at the different ways it will.
In the short–term, investment banking revenue will be down
In the short-term, it is likely that we will see a lower amount of transactions and deals. This heightened risk in investment banking is because of the market volatility that has come from the increased political, economic, and market uncertainty. We’re seeing more interest in Cardano blockchain platform sites and other alternative investments.
The relative strength of US banks will improve when compared with European banks
Brexit could present an opportunity for the big banks in the US, as they have the chance to benefit from an epic market share. Numerous financial experts have predicted that US investment banks will extend their lead over European banks as a result of Britain leaving the EU.
Weak sterling will lead to less valuable UK earnings
There was a dramatic fall in sterling when the vote to leave the EU was announced. And, although we expect this to rise over time, it does mean that (for now at least) any profits banks earn in the UK will be of less benefit. You only need to look at the figures released by Santander to see that this is the case.
Profitability of UK branches and subsidiaries will reduce
While the economy slows, we will see higher loan losses and lower loan growth. This means that UK subsidiaries and branches are not as profitable.
Rates will be lower for longer
Brexit has caused an increased level of fragility and uncertainty, which means that interest rates will remain low for a little while longer. Many experts predict they could be static for the rest of the year. This means that banks will not earn as much money, as the gap between what they charge for loans and what they pay for funding is reduced.
Long–term reduction in trading revenue
Investment banks that have big financial markets businesses are likely to be hit because analysts have revealed that they foresee a fall in trading revenues. This is because investors will sit on the sidelines due to the volatility caused by the uncertainty that surrounds Brexit.
Short–term increase in trading revenue
There have been reports that trading levels have been ten times the amount they usually are, which, of course, means that commission is also ten times as high.