RBS Tumbles More Than 10% on Concern of Labour Government

(Bloomberg) -- Royal Bank of Scotland Group Plc plunged more than 10 percent as speculation mounts that British Prime Minister Theresa May’s government may collapse, leaving open the possibility the state-controlled lender may face an uncertain future under a Labour opposition.

Jeremy Corbyn, the Labour leader, has vowed to consider breaking up the lender to create new local public banks. RBS lost more than 2.5 billion pounds ($3.2 billion) in market value as British lenders such as Lloyds Banking Group Plc and Barclays Plc also fell.

“RBS is tanking as traders fear the possibility of a Labour led government,” said Gary Greenwood, analyst at Shore Capital. “I’d like to see how it would plan to nationalize RBS though as they would be a forced buyer in that scenario, and big funds with deep pockets aren’t just going to roll over and sell to the Government on the cheap.”

May’s government and her day-old Brexit deal are on the verge of unraveling after several of her ministers resigned on Thursday morning. While a no-deal Brexit risks complicating the way banks do business in the European Union, the ouster of May would potentially bring Corbyn, a left-wing firebrand, closer to power.

What’s more, for the banks, leaving the EU in March without an agreement on the exit terms or a two-year transition period poses risks to the U.K. Further damage to an already weakening economy, weighed down with ballooning household debt and lackluster foreign investment, raises the prospect of increased delinquencies and declining loan growth.

Meanwhile, Britain’s Financial Conduct Authority said it’s “in regular contact” with the nation’s banks, responding to a Reuters report that Bank of England Governor Mark Carney requested a conference call between regulators and lenders to discuss the current market turmoil and the pound’s plunge.

©2018 Bloomberg L.P.