British banks face 25% earnings hit from no-deal Brexit, says Citi

Bloomberg

As the likelihood of Britain crashing out of the European Union (EU) without a trading agreement rises, Citigroup Inc estimates that such an event could cut domestic banks’ earnings by as much as 25 percent.
A “no-deal exit” would curtail the revenue of high street lenders as economic growth slows and interest rates remain depressed, analysts including Andrew Coombs wrote in a note to clients.
That said, it wouldn’t necessarily lead to downside for the share prices of banks’ focussed on their home economy.
“What is different to June 2016 is that implied equity risk premiums are already at elevated levels, so one could argue this risk is already captured in existing UK domestic bank valuations,” they wrote.
Investors should buy shares of Lloyds Banking Group Plc, whose resilient organic capital generation should support buybacks, as well as Royal Bank of Scotland Group Plc, which is gaining market share and has more cost-saving opportunities, the analysts said.
They recommend selling Barclays Plc, however, describing its revenue and returns targets as “aspirational,” and adding that it may disappoint on costs.
Prime Minister Boris Johnson’s plan to suspend parliament from mid-September has led to a backlash and legal action by opponents of a no-deal exit, although it survived an early court test.
Johnson’s Brexit team will meet with European Union officials at least twice a week in September as they attempt to negotiate a new agreement.

Brexit cuts Britain’s spending, productivity: Bank of England
Bloomberg

The UK’s planned departure from the EU has cut the nation’s productivity by between 2 percent and 5 percent since the 2016 referendum, according to a report published by the Bank of England.
Senior managers at British companies are spending several hours a week planning for Brexit, researchers including Nicholas Bloom said in a working paper published on the Bank of England website. Investment has fallen by about 11 percent in the three years since the Brexit vote, the report said. The drop in spending has occurred later than forecast at the time of the vote, reflecting the “size and persistence of this uncertainty.”
The paper is based on a survey of 5,900 UK firms accounting for about 3.7 million employees, or about 14 percent of private sector jobs in the UK, the authors said.