Moody’s lowers the outlook on 12 Britain lenders

Bloomberg

Moody’s Investors Service lowered the outlook on 12 UK lenders, including Barclays Plc and HSBC Holdings Plc, after predicting last week’s vote to exit the European Union will reduce their profitability.
“We expect lower economic growth and heightened uncertainty over the UK’s future trade relationship with the EU to lead to reduced demand for credit, higher credit losses and more volatile wholesale funding conditions,” Moody’s Laurie Mayers, an associate managing director for UK financial institutions, said Tuesday in a statement. “This will be negative for banks’ credit fundamentals.”
The ratings firm cut the outlook on lenders including Barclays, HSBC and Santander UK to negative from stable, while lowering Lloyds Banking Group Plc and Principality Building Society to stable from positive. The outlook for the UK banking system overall was changed to negative from stable, according to the statement.
The move also was prompted by the drop in the UK’s Aa1 government bond rating outlook to negative from stable, Moody’s said.
Insurers including Legal & General Group Plc and Standard Life Plc also had their outlooks cut to negative from stable.
“We expect heightened uncertainty, diminished confidence and lower spending and investment to result in weaker economic growth in the UK, reducing insurers’ business growth potential and profitability,” Moody’s said in a separate statement. “Furthermore, financial market volatility will weigh on insurers’ capitalisation.”