Bank of America Stock Falls as Brexit Becomes a Reality

Bank of America (NYSE:BAC) shares sank over 7% after the UK voted to leave the EU. The bank’s shares are down over 2% in pre-market trading on Monday, with more fluctuations expected in the coming days.

Brexit is expected to shake up the global economy, with banks at the forefront of the volatility.

Bank of America passed this year’s stress test last Thursday, but Brexit is expected to put downward pressure on the bank. The vote is expected to harm the bank by:

1. Trading Volumes Expected to Drop

Heightened volatility in equity and debt markets will cause the bank’s clients to lower their trading volumes. Bank of American profits on commissions when investors buy and sell securities, which is expected to slump as investors ride out the volatility caused by Brexit.

Trading income for the bank fell 16% in the first quarter as volatility plagued the market.

2. The Fed is Less Likely to Raise Interest Rates

The Federal Reserve will be under pressure to keep rates unchanged. May’s jobs report was unfavorable, too, with the lowest pace of hiring in over 5 years reported. Lower interest rates eat away at banks’ profits.

Bank of America will also need to move some of its banking units to the European Union and diversify outside of London as a result.