British banks are playing the waiting game after Brexit vote

British banks are in a "holding pattern" following Britain's European Union referendum, according to a report released on Wednesday (24 August) by Standard & Poor's (S&P) Global Ratings.

The ratings agency said the the half year results of the major British lenders did not yield any major surprises, which indicates a degree of resilience in banks' core businesses, but also highlighted the banks were playing a waiting game as the post-Brexit economic landscape takes shape.

The results were characterised by broadly flat net interest margins, as deposit repricing offset some asset margin pressure, S&P said, adding UK banks have made good progress on cost reduction programmes and credit losses remained relatively low.

Investment banks, on the other hand, experienced a difficult six months, although the drop in equities revenue was partly offset by higher credit rates as well as by forex exchange revenue deriving by currency volatility.

S&P, however, added that material changes were likely to develop over the next 12 months as significant litigation items remain pending for some banks.

"Having navigated the near-term market volatility following the 'Leave' result in the 23 June referendum, management teams' guidance statements struck a cautious tone on longer-term earnings challenges," S&P analysts said.

The financial sector was considered to be among those more exposed to risk in the event of a fallout following the pro-Brexit vote, with some suggesting the UK could see a number of major lenders moving operations away from the UK. However, in July, both Barclays and HSBC confirmed they had no plans to relocate their businesses away from Britain, indicating London would remain the centre of the financial world despite Britain's impending exit from the EU.

In the same week, a report published from PwC showed 20 start-up banks and financial firms, which include British, European and non-EU lenders, were set to invest approximately £500m ($666m) in the British market.

S&P added the main impact of Brexit on UK banks over a two-year period will be related to Britain's future relationship with the EU, and to the steps taken to address macroeconomic deterioration, such as monetary easing. "The direct and indirect implications of Brexit for UK banks' credit profiles are therefore likely to evolve slowly and are unlikely to be substantially reflected in their full-year 2016 results," S&P said in a note.

"We reflected the potential negative consequences of this uncertainty by revising our outlook on the majority of UK banks to negative from stable following the Brexit vote."