CNBC: Banks Anticipating Tough Second Half 2016

It is well documented that the financial markets experienced a rough ride during the first half of 2016, and the uncertainties following Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Read this Term and weaker-than-expected corporate earnings results point towards a tough second half, according to a report in CNBC today.

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The impact was particularly felt by European banks as the shock and Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term surrounding the events sent banking stocks tumbling. Big European banks including Deutsche Bank and Credit Suisse saw their shares plummet - RBS being worst-hit, with its shares diving by more than 30 percent after the referendum.

The ongoing uncertainty as to when the UK will begin the process of leaving the EU has left banks on a knife-edge which are said to be "preparing for an economic nuclear winter situation."

A source from a major investment bank reportedly told CNBC that financial services firms have lined up a strategy that takes into account the worst-case scenario that could happen by the end of this year which could mean triggering Article 50, referendums in other European nations leading to a break-up of the euro or sterling hitting $1.20 or lower.

Lehman Brothers

The source further explained that the challenge in 2016 is nothing compared to when the Lehman Brothers collapsed in 2008 and the banking sector is this time far more resilient. "Markets hate uncertainty and the events this year have unfortunately created a lot of mystery around what is going to happen next."

A common theme across second-quarter results has been a warning of uncertain times ahead especially from big investment banks who have cited uncertainty and volatility in markets as a reason for weak results, warning that the second half will be challenging.

As a result, a number of banks have cut their exposure to equities due to the volatile nature of stocks in the first half of the year. Earlier this month, for example, Goldman Sachs, which previously warned of restructuring post-Brexit, downgraded stocks to underweight as part of its 3-month asset allocation citing global equities to be at the upper end of their "fat and flat range".

The challenges continue to loom and some analysts are stressing the importance of industries like banking focusing on maintaining their solvency ratios, minimising their risks and simplifying their businesses.