Brexit batters banks, builders, easyJet

Added 27th June 2016

Trading in domestically-focused banks, RBS and Barclays, was temporarily suspended on Monday after their share prices dropped 9% and 10%, respectively.

Brexit batters banks, builders, easyJet

Despite sterling’s precipitous decline since investors got wind of the Brexit outcome, the FTSE 100 has done a better job rallying against the volatile currency than many analysts predicted.

However, there has been a noticeable division between the domestically tethered FTSE 100 firms and the more internationally focused companies whose price per share has risen.

Comparing the performances of RBS and Barclays on the one hand with more outward facing peers like HSBC further illustrates this point. The former two have been some of the worst performers of the FTSE 100 on Monday, falling 14.32% to 175.90p and 12.35% to 134.90 by late Monday morning, respectively. Whereas HSBC has only seen a 2.05% dip in its share price to 438.75p.

Mirroring this trend, while the FTSE 100 recovered some of its losses on Friday afternoon, before falling again on Monday, the FTSE 250 did not see much of a rally and continued to fall on Monday.

In morning trade, the FTSE 250 descended by 4.62%, while the FTSE 100 fell by only 1.3% within the same time frame.

The biggest FTSE 100 underperformer, EasyJet, saw its shares plummet by 18.4% to 1073.62p at the time of publication.

In a statement released Monday morning, EasyJet announced that the result of the referendum would likely place a greater strain on its third quarter figures and see the continuation of the extremely challenging operating environment into the summer. The airline has already suffered 1,061 cancellations in the third quarter and anticipates that figure will increase in the uncertain post-Brexit climate.

“Following the outcome of the EU Referendum, we also anticipate that additional economic and consumer uncertainty is likely this summer and as a consequence it is expected that revenue per seat at constant currency in the second half will now be down by at least a mid-single digit percentage compared to the second half of 2015. In addition, recent movements in fuel prices and exchange rates are now expected to add around £25 million of additional cost in the year to that guided at the Half Year Results. In response, easyJet is continuing its efforts to drive ex fuel cost savings,” the airline reported.

Nicholas Hyett, equity analyst at Hargreaves Landsown, took the position that Brexit was not the sole catalyst for the airline’s underperformance.

“A vote by Britain to leave the EU can hardly help a company like easyJet, particularly seeing as the fall in the pound will put Britons off travelling overseas,” he said. “However, this morning’s profit warning is as much a result of massive operational disruption as falling passenger demand. Rain, strikes and the impact of the EU referendum have all damaged profits, and resulted in revenue per seat at constant currency falling further.”

Other big movers on the day were housebuilders Taylor Wimpey and Barratt Developments, down 15.5% and 13.2% respectively. 



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