What S&P 500 Companies Are Saying About Brexit Impact
Brexit is a hot topic this earnings season
Most U.S. executives say it's too early to gauge the impact
by Ciara Linnane
Brexit is turning into a hot topic for more than just those Britons who voted “remain.”
The U.K. vote to leave the European Union, which roiled global financial markets immediately after the result on June 24, is popping up regularly on the conference calls of U.S. companies reporting second-quarter results, and analysts are not exactly getting a clear picture.
So far, 126 members of the S&P 500 (SPX) (SPY) have reported, and the word Brexit has shown up 214 times on calls, according to FactSet data.
Executives from a wide range of industries have fielded questions and attempted to predict what the vote means for their business. But that’s no easy task, as the U.K. government has yet to trigger the Article 50 clause in the Lisbon Treaty that signals its intention to leave the trading bloc.
Once that happens, the U.K. will begin negotiations that could take as long as two years and will redraw every aspect of its relationship with the EU from trade to immigration to the movement of goods and people. The uncertainty has already caused a “dramatic downturn” in U.K. economic growth in July, the fastest pace since the 2008 financial crisis, according to the research firm Markit.
By sector, the most Brexit questions were put to banks, which are expected to be hit if the vote loses them the EU “passport” that allows them to operate in all EU states without requiring separate regulatory oversight. That may force them to relocate staff and operations to EU countries, and away from the City of London.
Companies in other sectors have mostly discussed the decline in the value of the British pound, which has lost more than 10% of its value since the vote. That has caused pain for some companies and helped others.
Here are some of the comments made by U.S. executives on Brexit on recent calls:
“We are hoping that the political leaders are sensible ... and will give businesses time to adjust to the new reality, whatever it is. It would be nice if it doesn’t create huge turmoil.” — J.P. Morgan Chase Co. JPM, +0.55% CEO Jamie Dimon
“[investors] are afraid, and they are pulling back, as evidenced by more than $55 trillion in bank deposits sitting in the United States, China and Japan alone. And even as markets have rallied recently, many clients have missed that upside and find themselves feeling even further behind.” — Laurence Fink, CEO of BlackRock (BLK) BLK, +0.89% the world’s biggest asset manager
“In terms of Brexit, I just think Brexit is just another point of volatility. It wasn’t the outcome we hoped for, but we were plenty ready for that as a — just another point of volatility.” — Jeffrey Immelt, CEO of General Electric Co (GE). GE, -1.93%
“Brexit has also introduced significant uncertainty, which is never good for business sentiment. Most economic prognosticators are expecting an economic slowdown in Europe. Beyond this, it is too earlyt o know what the broader and longer-term implications of Brexit are for our business.” — Vasant Prabhu, CFO of Visa Inc. (V) V, +1.28%
“If current post-referendum market conditions are sustained throughout the remainder of 2016, we believe it could have an impact of up to $0.4 billion to the second half of 2016.” — General Motors Co. (GM) GM, +0.34% , in presentation slide
“We are extremely well positioned. We already have in place and have had in place for a long period of time a Belgian Brussels bank. It is well established. It’s an operating center. It has capital liquidity, governance, management, everything that a European bank is required to have. And it’s already passportable across all of Europe.” — Bank of New York Mellon Corp. (BK) BK, +1.66% CEO Gerald Hassell
“On Brexit, with a weaker pound, we are seeing a boost in U.K. exports, which is driving a strong start to the quarter for our international business. This is offset by weaker U.K. import demand, particularly in the U.S. corridor. We have yet to see the impact of an economic slowdown on the U.K. domestic marketplace.” — eBay’s (EBAY) EBAY, +1.88% Scott Schenkel
“It certainly didn’t help but, again, nothing that said we should change our operating EPS for the year. What I typically observe in these kinds of instances is that our discussions with our clients have to go through a process of reprioritization, if you will. And remember, the extent of the discussions we have with our clients is about their most important processes.” — IBM (IBM) IBM, +0.97% CFO Martin Schroeter
“As the U.K. contemplated the Brexit vote, users turned to Yahoo to follow 37 hours of continuous live updates that resulted in the highest number of users on Yahoo Finance in four years.” — Yahoo Inc. (YHOO) YHOO, +1.34% CEO Marissa Mayer
“We’re hopeful along with everyone else that the parties that are engaged in these negotiations will be prudent and thoughtful, because obviously for all of us, a thoughtful negotiation outcome would just be good for economic growth. We’re contingency planners, and so we’ll contingency plan for multiple outcomes. But [it’s] way too early to speak specifically.” — Harvey Schwartz, CFO Goldman Sachs.
For more on the impact of Brexit, see Financial News: Brexit, which covers the fallout from the U.K.’s vote to leave the European Union.
Courtesy of marketwatch.com