Jul
04
U.K. Bank Bonds Ignoring Risk of House Price Drop, JPMorgan Says
ByInvestors are underpricing risks to U.K. bank debt if house prices fall as the country moves toward leaving the European Union, according to JPMorgan Chase & Co.
A 35 percent drop in home prices could lead to principal losses on the riskiest debt issued by Barclays Plc, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc, credit strategists led by Matthew Bailey wrote in a July 1 note.
“While this scenario is clearly extreme, it is by no means impossible,” they wrote.
There’s “a much higher chance” that lenders would have to raise capital or defer interest payments on the riskiest bonds, they wrote. That could cause prices on those securities to drop by 20 to 30 percentage points and a selloff in senior debt, they wrote…
U.K. Bank Bonds Ignoring Risk of House Price Drop, JPMorgan Says
