Research Team at Deutsche Bank, sees the EU referendum as a risk for bank equity performance principally because of the uncertainty of the implications of Brexit for the outlook of the UK economy, and for the legal and regulatory framework of providing financial services into and out of the EU. Key Quotes "We see two key areas for interpreting a potential ‘out’ vote for banks. The first is the potential impact on profitability: banks are highly cyclical, and we would expect UK bank operating performance to be closely tied to that of the UK economy, as well as any monetary policy or FX changes which result from the vote. A downturn in the UK economy is likely to lead to higher credit losses for UK banks, whilst looser monetary policy is generally negative for bank income generation. Most concentrated in the UK is Lloyds (almost entirely UK), challenger banks such as Aldermore (all UK), RBS (around 85% UK, remainder mainly in Ireland) and Barclays (around 50%). For HSBC and Standard Chartered the UK is not the home market. The second is the potential operational and regulatory impact. We think that capital requirements and the regulatory framework from the PRA are unlikely to change significantly in the event of a Brexit (the UK has been a key contributor to global regulatory changes post-crisis). However, there is significant uncertainty over the implications for passporting of financial services into the rest of the EU given we do not know the terms of a potential exit. This has implications not just for UK-listed banks, but for other global financials which use the UK as a hub for providing banking operations across Europe.” For more information, read our latest forex news.