Fan gives verdict on Lloyds Brexit impact

It seems less likely now that Britain will leave the European Union (EU). But, just in case there's a swing back toward 'Leave', the kind analysts at Jefferies have given Lloyds the once-over and assess the possible impact of a Brexit on the high street lender.

Vote to ditch membership of the EU this week and a short-lived recession is not out of the question. Lloyds is a top-rated 'buy' at Jefferies, but what does the broker think its chances are if things go the wrong way on the 24th?

"Functionally speaking Lloyds is relatively defensive in a Brexit scenario given two-thirds of its balance sheet is in UK mortgages," writes banks analyst Joe Dickerson. "However a recession would impact H2017 - 2018 EPS [earnings per share] given normal lags.

"Assuming cost of risk rises to 60 basis points, residential mortgage risk weights rise 50%, commercial bank fee income falls 10% from FY 2015 base and a £1 billion cost for separating Bank of Scotland, our 2018 EPS falls to 5.1p (from 8.4p), dividend per share to 1.4p (from 7.8p) to maintain a 13% CET1 [common equity tier one] ratio and price target to 64p (from 108p)."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.