HSBC sees 'No' vote in Italy referendum

Analysts at HSBC believe that markets have priced-in a No vote in Sunday’s Italian referendum on constitutional reform.

Key Quotes via Digitallook:

“A ‘yes’ win could trigger outperformance from banks”

“This, coupled with better funding costs driven by an improved spread on the Italian sovereign, may underpin banks’ revenue”

“In the event of a ‘no’ vote and Renzi’s departure, banks should be heavily penalised, at least in the short term”

“We believe the uncertainty and the political vacuum created by a caretaker government would limit the upside potential in the medium term”

“In addition, the possibility of early elections in 2017 would probably impact growth more negatively than expected, ultimately slowing down any earnings recovery”

“During the Monti government (the last technocrat government, November 2011-April 2013) for example, Italian banks underperformed European banks by 13%”

“Most likely Italian banks would underperform the general domestic index and European bank index given their dominant market exposure and the impact from sovereign spreads, which would probably widen”

“We believe that a price set-back could represent an opportunity for long-term oriented investors”