Could independence affect Scottish stocks like RBS?

Could independence affect Scottish stocks like RBS?

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The prospect of independence doesn't seem to be very invigorating for Scottish stocks.

This Thursday Scotland will vote on its independence. If the Scottish National Party (SNP), the party currently in power, is victorious then Scotland's more than 300 year-old union with England will come to an end.

Over the past two months opinion polls altered drastically. At the end of June, YouGov, the internet-based market research firm, suggested the pro-Union camp had a 19% lead over the the seperatist faction (SNP) with 12% undecided.

Last week similar polls showed the "Yes" (independence) camp trailing by just 4% with 5% undecided. With just two days to go, the race is too close to call, with a latest "poll of polls" putting "No" at 51% and "Yes" at 49%

Scotland has a rich history when it comes to banking. Many credit a Scot, David Hume, with creating the first economic model in his 1742 essay "Of the Balance of Trade." 

However, Scotland's two biggest banks, the Royal Bank of Scotland (RBS) and Lloyds (LYG), are wary about the impact of seperation from England. Last Thursday they announced that they would move their headquarters from Edinburgh to London if Scotland voted for independence. 

In the event of a "Yes" vote, an RBS statement says "material uncertainties" could arise from the referendum and impact RBS's credit ratings. For Scotland to form a new government would also mean the potential for new expenses and regulations for companies based there; in other words, banks are feeling a pressure to relocate to Britain as they devil they know, versus facing any further uncertainty. 

Many analysts believe RBS and Lloyds may decide to move their headquarters to London even if Scotland votes against independence, which by some estimates could cost the banks up to $1.6 billion each.

Following the announcements last week, shares in Lloyds rose up to 1.3% and RBS rose by more than 2% as markets openend and investors greeted the news.

How do you think the markets will react to Thursdays referendum? Use the information below to begin your analysis and let us know what you think in the comments.

Click on the interactive chart to view data over time. 

1. The Royal Bank of Scotland Group plc (RBS, Earnings, Analysts, Financials): The Royal Bank of Scotland Group plc, through its subsidiaries, offers banking and financial services to personal, commercial, corporate, and institutional customers in the United Kingdom, the United States, and internationally. Market cap at $64.92B, most recent closing price at $11.46. 

 

 

2. Lloyds Banking Group plc (LYG, Earnings, Analysts, Financials): Provides various banking and financial services to personal and corporate customers primarily in the United Kingdom. Market cap at $86.52B, most recent closing price at $4.91. 

 

(List compiled by Nico Willson. All data sourced from Zacks Investment Research.)

 

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2 responses to “Could independence affect Scottish stocks like RBS?”

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