By Lawrence White and Iain Withers
LONDON (Reuters) - Some of Europe's biggest banks have warned the coronavirus will hit their already under-pressure earnings, as a lockdown in Britain and across parts of continental Europe will slow economic activity, eat into fee income and put corporate borrowers at risk.
Britain's Lloyds Banking Group (L:LLOY) will delay part of a 3 billion pound technology investment programme in response to the epidemic, Chief Executive Antonio Horta-Osorio told an investment conference on Tuesday.
"Now we have a huge external shock, which will provide a delay," he told an audience of investors and analysts at the Morgan Stanley (NYSE:MS) European Financials conference in London.
Prime Minister Boris Johnson on Monday shut down social life in Britain and ordered the most vulnerable to isolate for 12 weeks. The moves, which follow similar actions in Italy and France, are likely to hit banks from multiple angles.
A decline in consumer spending will lower the bank's fee income, Horta-Osorio said, and Lloyds will likely sell fewer mortgages as homebuyers are prevented from viewing potential properties by the social isolation measures.
Spain's Santander (MC:SAN), the euro zone's second biggest bank by market value, offered a more upbeat outlook at the same conference.
The bank's chairman Ana Botin said a "v-shaped" scenario of sharp economic decline followed by quick recovery would cut the bank's profits by only 5% this year, excluding any mitigating actions.
Measures taken to alleviate the impact of the coronavirus slowdown on businesses could also hit banks, executives said.
Royal Bank of Scotland (L:RBS) Chief Executive Alison Rose said it was "too early" to give detail on the likely financial impact of the outbreak on RBS, but said the Bank of England's recent 50 basis point rate cut would likely hurt its income.
The interest rate cut would hit revenues by around 170 million pounds per 25 basis point cut – translating to a roughly 340 million pounds hit overall, she said.
"Clearly a lower rate environment places more pressure on the NIM (net interest margin, a measure of profitability) and we will obviously respond to that," she said.
