Lloyds Banking Group PLC (LON:LLOY) would least exposed to some of the new fears hitting the banking sector, analysts at RBC Capital Markets said, though the sector is expected to hit profits across the sector.
RBC ran its own stress tests to analyse potential market scenarios with a large theoretical hit to credit quality and provisions for oil exposure.
READ: RBS and Barclays follow Italy in offering loan payment holidays to coronavirus hit customers
The sharper moves in capital markets are likely to impact investment banking revenues harder than wealth management and asset management, RBC’s analysts said.
Lloyds came through the analysts stock-screen with the relative lowest exposures to a coronavirus stress scenario and from an oil & gas shock relative to 2020 profit before tax and relative to CET1 capital, while Royal Bank of Scotland PLC (LON:RBS) also did well on the coronavirus stress scenario.
Barclays PLC (LON:BARC) was seen as the most potentially sensitive to coronavirus stress of the London-listed lenders, even more than Asia-focused HSBC PLC (LON:HSBA).
The potential impact on UK banks from a Bank of England reduction in interest rates suggested to the analysts that RBS would be most impacted by a rate cut and Virgin Money OneSavings Bank (LON:OSB) and Paragon Banking Group PLC (LON:PAG) would be “least impacted”.
RBC said around Europe, its analysts thought the largest potential profit exposure was at Deutsche Bank, Credit Suisse, Commerzbank and UBS.
The note from RBC came out as Italy’s government said payments on residential mortgages will be suspended for the whole country after a national quarantine lockdown was imposed.
UK high street banks also came out to offer payment holidays and other support to business and residential customers who are in difficulty because of the Covid-19 outbreak.