February 27, 2019 / 7:47 AM / 3 months ago

Risk of no-deal Brexit receding, some banks say

(Reuters) - The risk that Britain will crash out of the EU without an agreement on March 29 has receded in the past few weeks, some banks and asset managers say, citing expectations that the exit deadline will be extended to allow members of parliament to reach a deal.

A pro-Brexit protester holds a placard outside of the Houses of Parliament in London, Britain, February 26, 2019. REUTERS/Toby Melville

At the end of January, banks informally canvassed by Reuters for their forecasts saw the no-deal probability as low but rising. Some of those banks have since revised down that risk.

Prime Minister Theresa May on Tuesday offered parliament the chance to vote on delaying Brexit or opting for a no-deal outcome if MPs again reject the agreement she has negotiated with the European Union in a vote planned for March 12.

Sterling surged to 21-month highs against the euro of 85.88 pence, and hit four-month highs of $1.3238, up around 3.3 percent this year.

Graphic: tmsnrt.rs/2Ua88yG

Below are the views from a selection of investment banks and asset managers:

DEUTSCHE BANK

Puts probability of a no-deal Brexit at 10 percent.

GOLDMAN SACHS

Says the probability of no-deal Brexit remains at 15 percent. It still sees a 35 percent chance of Britain remaining in the EU and a 50 percent probability of May’s Brexit deal eventually being agreed. That view embodies a three-month extension of Article 50 through June, according to the bank.

BNP PARIBAS

Its view of a 20 percent chance of a no-deal Brexit and a 35 percent chance of a second Brexit referendum remains unchanged. It said last month that a delay to the March 29 deadline was “inevitable”.

STANDARD CHARTERED

Maintains its view of a 20 percent chance of no-deal Brexit. Says even if risks for the March 29 deadline recede, an extension of Article 50 could still result in a no-deal outcome.

BERENBERG

Puts risk of no-deal exit at 25 percent and says this could be revised down if an extension of Article 50 exit deadline is confirmed.

ING BANK

Puts the probability of no-deal exit at 20 percent.

MUFG

Sees 10 percent chance of a no-deal Brexit, compared to 10-15 percent in January, and predicts an extension of the March 29 deadline for leaving.

NORDEA

Puts chance of no-deal scenario at 20 percent, compared to 25-30 percent last month. Is “very confident” the deadline will be extended and puts chance of a second referendum at 30 percent.

BMO

Is an outlier in that it sees a hefty 53 percent odds of no-deal exit, and reckons the path to delaying Brexit and removing no-deal will be more convoluted than sterling moves imply.

AMUNDI

Europe’s largest asset manager sees a 20 percent probability of no-deal Brexit but reckons the chances of a “prolonged extension” to the March 29 deadline have risen to 40 percent, from 30 percent a month ago.

Reporting by London markets team; Graphic by Ritvik Carvalho; Compiled by Sujata Rao; Editing by Kevin Liffey

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