Tuesday 17 December 2019 12:06 pm

No-deal Brexit fears trigger sell-off of Barclays, Lloyds and RBS shares

Shares in Barclays, Lloyds and Royal Bank of Scotland (RBS) all slumped in early trading after Boris Johnson brought back the spectre of a no-deal Brexit today.

The trio failed to impress in yesterday’s Bank of England stress tests, where analysts warned that a strategy to double a 100-basis point capital buffer designed to protect lenders in times of a financial crisis could put 2020 share buyback plans at risk.

Read more: Boris Johnson to rip out concessions in Brexit bill amendments

However, analysts warned today’s sell-off of shares has more to do with the Prime Minister’s strategy to amend his Brexit bill to legislate against any extension of the transition period beyond December 2020.

Barclays saw shares fall 2.8 per cent to 187p while RBS’ share price sank 3.9 per cent to 250.8p. Lloyds, meanwhile, fell the most, with traders sending it down 4.9 per cent to 64p.

Enshrining the departure date in law means Johnson is “increasing the risks of a no-deal Brexit at the end of next year”, Michael Hewson, chief market analyst at CMC Markets, warned.

As a result both Lloyds Banking Group and Royal Bank of Scotland are amongst the biggest fallers.

The Prime Minister’s tactic that risks a no-deal Brexit also triggered a fall in the pound that saw sterling give up all its post-election gains. It is now trading down 0.78 per cent against the dollar at 1.32.

Read more: Sterling sinks as PM vows not to extend Brexit transition period

“For those who thought Boris Johnson might take a very different approach in government to Brexit as opposed to on the campaign trail, this morning’s news will come as a rude shock,” added IG’s chief market analyst, Chris Beauchamp.

“The new MPs have barely got their feet under the table but it looks like the PM is taking a much more dogmatic approach than some had hoped.”

“In essence all of the big gainers of the past few days are giving back some of their gains as the reality check of the possibility of a no-deal Brexit, while still over a year away, has tempered some of the enthusiasm from last Thursday’s election result.” Hewson added.

Read more: How Boris Johnson became the heir to Blair

The FTSE 100 has remained broadly flat while the wider FTSE 250, more exposed to the UK domestic economy, has fallen 1.3 per cent.

UK house builders are struggling for the same reasons, Barratt Developments and Berkeley Group have struggled the most. Barratt have dropped 2.8 per cent to 752.2p and Berkeley is down by 3.15 per cent to 5,050p.