Brexit bombshell battered markets around the world on Friday. The FTSE 100 nosedived by around 8% after the opening, but has recovered in the last hours of trading. Shares of almost all of the Europe’s banks are crushed in what analysts call the biggest slump since the financial crisis, which has wiped billions off the market overnight. In the US, the Dow Jones Industrial Average has plunged by over 2% as investors fear economic reverberations of the surprising decision by the British voters.
Huge uncertainty looms large over the banking sector following the UK’s decision to leave the EU. Major European and US banks use the UK as a springboard for their services and operations across Europe. UK’s exit from the Union will result in cross-border transaction hindrances and new regulations, which could hurt the current financial infrastructure. Almost all the European banks were vehemently against Brexit. Deutsche Bank’s CEO John Cryan, commenting on the UK’s decision to part ways with the EU, said on Friday: “I’m afraid that this is not such a good day for Europe. At this stage, we cannot fully foresee the consequences, but there’s no doubt that they will be negative on all sides.”
Among the major banks, which are bearing the brunt of Brexit vote this morning are Royal Bank of Scotland Group PLC (NYSE:RBS), Barclays PLC (ADR) (NYSE:BCS), JPMorgan Chase & Co. (NYSE:JPM), Citigroup Inc (NYSE:C) and Bank of America Corp (NYSE:BAC). Let’s take a closer look at these stocks and see what the funds in our database think about them.
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Royal Bank of Scotland’s Stock Crushed: Management Reassures Customers
Royal Bank of Scotland Group PLC (NYSE:RBS)’s stock has plunged by around 20%. The struggling bank whose shares have lost almost 50% in the last 12 months, recently announced plans to cut 900 jobs as part of its plan to reduce costs. The bank has cut over 2,500 jobs since January. In a statement, RBS said that the UK’s vote to leave EU will have no “immediate impact” on customers’ everyday banking services. A total of 10 funds from our database were long Royal Bank of Scotland Group PLC (NYSE:RBS) at the end of the first quarter. Jim Simons’ Renaissance Technologies owns approximately 1.24 million shares of the company.
Barclays Ready to Do “Whatever It Takes” after Brexit
Barclays PLC (ADR) (NYSE:BCS)’s stock has slid by nearly 22% so far today. Barclays Chief Executive Jes Staley said in a statement that the bank is ready to do “whatever it takes” to serve its clients. He said that Barclays is anchored in both the UK and the US and this is the core of its strength. Recently, Joseph Dickerson at Jefferies said that Barclays is one of the most vulnerable companies to Brexit as its share price is highly correlated with the volatility in sterling. Overall, 12 funds tracked by us held long positions in Barclays PLC (ADR) (NYSE:BCS) at the end of March, having amassed $275.4 million worth of stock. Ken Fisher’s Fisher Asset Management owns more than 21 million shares of the company as of March 31.
On the next page, we will discuss JPMorgan, CitiGroup and Bank of America.
JPMorgan’s CEO: Challenges are Coming
JPMorgan Chase & Co. (NYSE:JPM) is also not safe from the repercussions of the Brexit news either and the stock has inched down by around 5%. JPMorgan Chase CEO Jamie Dimon and top executives issued a statement early Friday morning, recognizing that the bank will face challenges due to the Brexit and adding that the bank may seek to change its legal structure and its geographic positioning to comply with the new regulations. Natixis Global Asset Management’s Harris Associates is one of the 97 funds tracked by us that reported stakes in JPMorgan Chase & Co. (NYSE:JPM) as of the end of the first quarter.
Citigroup’s Stock Punished
Citigroup Inc (NYSE:C)’s stock has declined by around 7.70% following the UK referendum results. Earlier this month, Citigroup’s UK head James Bardrick warned the bank’s employees that if Britain leaves, they might have to be moved out of London into the EU. Citigroup has a staff of 9,000 people in the UK. Among the funds tracked by Insider Monkey, 101 hedge funds amassed approximately $8 billion worth of Citigroup Inc (NYSE:C)’s shares at the end of the first quarter. Seth Klarman’s Baupost Group owns around 102.55 million shares of the company.
Shares of Bank of America Down
Shares of Bank of America Corp (NYSE:BAC) took a beating and are down by nearly 6%. The company is also expected to relocate a part of its operations from the UK into the European continent following the Brexit, as it would allow BofA to conduct operations with countries from the European Economic Area. As of the end of the first quarter, 110 funds tracked by us own shares of Bank of America Corp (NYSE:BAC).