• Deutsche Bank cuts state-backed banks amid low interest rates
  • Bank of England lowered key interest rate by 25 basis points

The U.K. state-backed lenders Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc fell in London trading after Deutsche Bank AG analysts cut ratings on their shares on the potential for Brexit to crimp their earnings.

RBS fell as much as 3.6 percent after David Lock, an analyst at Deutsche Bank, downgraded the stock to sell from hold in a note to clients. Lloyds fell 2.2 percent to 59.63 pence after Lock cut his rating to hold from buy, citing the impact from lower interest rates in the wake of the U.K.’s vote to leave the European Union.

Bank of England Governor Mark Carney unleashed a stimulus package last month, including the first interest-rate cut in seven years, to offset any potential fall in output in the wake of the June 23 Brexit vote. The BOE rate cut will probably cost nine of the U.K.’s biggest lenders about 1.6 billion pounds ($2.1 billion) in missed revenue, with Lloyds losing out on about 456 million pounds from its variable rate mortgage book, Lock wrote in the note.

“The lower-for-longer environment is clearly negative for the sector,” he wrote.

RBS fell 2.8 percent to 198.5 pence at 10:58 a.m. in London trading, the biggest drop in a month and the largest decline among banks in the FTSE 350 Index.

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