Lloyds share price in focus as UK banks fear ‘Brexit’ impact

Britain’s banks, including Lloyds Banking Group (LON:LLOY), think their business would suffer if the UK chooses to leave the European Union, a survey by the British Bankers’ Association (BBA) has shown. The upcoming referendum could also potentially impact the timing of the Lloyds retail share sale, which was put on hold earlier this year on account of the ongoing market volatility.

Lloyds’ share price fell in yesterday’s session, closing 1.23 percent in the red at 68.05p, largely in line with losses in the broader London market, with the FTSE 100 shedding 1.49 percent to close at 6,106.48 points. The shares have lost 15.56 percent of their value over the past year, as compared with a 13.04-percent fall in the Footsie, and are trading below the taxpayer’s break-even price of 73.6p.

The BBA, whose members include Lloyds, published its membership survey on the EU referendum yesterday, saying that almost 60 percent of the banks that took part in it believe that Brexit would have a negative impact on their organisation, with 26 percent saying the impact would be significant. Of those who had a position, 98 percent said the UK remaining in the EU was in the bank’s best interest.
“Our survey shows there is almost no appetite from banks for the UK to leave the EU,” BBA’s chief executive Anthony Browne said in a statement. “The majority of our members who responded to the survey also think that if the UK were to leave the EU, their business would be harmed.” The BBA, however, said that it would remain neutral because the majority “of those who responded said that their bank does not hold a position on whether or not the UK should remain in the EU”.
Lloyds, which is still part-owned by the government following its £20.5-billion bailout, is one of the lenders which have warned that the UK’s potential exit from the EU could hurt the bank and lead to higher interest rates. In its annual report issued earlier this month, the group said that a vote to leave the EU “may create a period of uncertainty and impact companies’ investment plans”.
“Crystallisation of any of these risks could impact the UK economy, which in turn would have a negative impact on the Group’s income, funding costs and impairment charges,” Lloyds added. As the nation’s largest mortgage lender, the FTSE 100 bank’s performance is closely tied to the fortunes of the UK economy.
The EU referendum comes at a crucial time for Lloyds, with the UK government looking to launch a retail sale in 2016-17 and fully exit its stake in the bank. While a brief surge in Lloyds’ share price above the break-even level earlier this month rekindled hopes that the sale could soon be back on track, such a move is seen as highly unlikely ahead of the Brexit vote on account of the expected market volatility.
As of 09:10 GMT, Friday, 25 March, Lloyds Banking Group share price is 68.05p.