UBS Wealth says no-deal Brexit would weaken pound to $1.25, sees sharp fall in banking stocks

FILE PHOTO: Some of the artwork details are seen on a large scale sample of the new twenty pound note during the launch event at the Turner Contemporary gallery in Margate, Britain, October 10, 2019. Leon Neal/Pool via REUTERS

LONDON (Reuters) - UBS Global Wealth Management said it expects the British pound to weaken to $1.25 and domestic banking stocks to slump 15-20% if the UK fails to strike a trade deal with the European Union.

“Ultimately we think it’s likelier that a deal will be struck between the UK and EU, but a no-deal exit cannot be ruled out,” said Caroline Simmons, UK chief investment officer at UBS Global Wealth.

The Swiss bank said it was bullish on UK bluechip stocks, expecting double digit positive returns over the next 9-12 months helped by a weaker sterling.

Components on MSCI UK index generate more than 75% of their revenues outside the UK, it added.

Reporting by Thyagaraju Adinarayan, editing by Elizabeth Howcroft