- Lender had $108.4 billion in U.K. exposure as of June 30
- Citigroup says it’s yet to see negative effect from referendum
Citigroup Inc., the lender that draws more revenue from abroad than any of its U.S. peers, said it expects a challenging business environment in part because of “significant uncertainties” following the U.K.’s surprise vote to leave the European Union.
The lender had $108.4 billion in exposure, including loans and derivatives, to the U.K. as of June 30, the most of any country other than the U.S., New York-based Citigroup said Monday in a quarterly filing. That compares with $110.4 billion at the end of 2015. About half of the second-quarter U.K. exposure was unfunded corporate lending commitments, the bank said.
The U.K. vote in June to leave the EU rocked financial markets, raised doubts about the nation’s economic growth and upended expectations for Federal Reserve interest-rate increases. The decision prompted Citigroup to provide more detail on its U.K. dealings in a section of its report that more often focuses on risks in emerging markets.
“The result of the referendum has raised numerous uncertainties, including as to when the U.K. may begin the official process of withdrawal and the commencement of negotiations with the EU regarding the terms of the withdrawal,” Citigroup said in the filing, adding that it hadn’t yet “experienced any significant negative impact to its results” from the vote.
Bank of America Corp. echoed the concern over uncertainties in a filing later on Monday, warning they may fuel market volatility for several years. The referendum introduced “complexities and variables” in estimating the fair value of certain units, it said. The bank’s net exposure to the U.K. rose to $56.3 billion at the end of June, from about $51.5 billion at the end of March.
Citigroup’s exposure to the U.K. was almost double that of Mexico, which ranked second on the bank’s list of top 25 international markets. The figure for Turkey was $4.6 billion.
Citigroup hired Mervyn King, the former Bank of England governor who has lambasted bankers and the financial industry, as a senior adviser in April, the Financial Times reported last week. King, 68, retired from the Bank of England in 2013 after a decade overseeing U.K. monetary policy and has since taught at New York University’s Stern School of Business.