Barclays, HSBC Have Outlook Cut by Moody’s After Brexit Vote

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  • Insurers Legal & General, Standard Life also have outlook cut
  • Ratings firm cites ‘heightened uncertainty’ in U.K. after vote

Moody’s Investors Service lowered the outlook on 12 U.K. 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 U.K.’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 U.K. 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 U.K. to negative from stable, while lowering Lloyds Banking Group Plc and Principality Building Society to stable from positive. The outlook for the U.K. banking system overall was changed to negative from stable, according to the statement.

The move also was prompted by the drop in the U.K.’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 U.K., reducing insurers’ business growth potential and profitability,” Moody’s said in a separate statement. “Furthermore, financial market volatility will weigh on insurers’ capitalization.”