Leading investment banks in the U.S. face certain fallout in the event that the U.K. leaves the European Union, with thousands of staffers set to see their jobs impacted.
That's the sentiment from a Keefe, Bruyette & Woods report, which says banks may have to increase expenses, shed staff and take a temporary earnings hit if U.K. voters approve the Brexit on June 23. Should the leave vote prevail, big banks would have to transition London staffers to cities in the EU to meet regulatory requirements, a large burden for the firms to shoulder.
"[A] U.K. vote to leave the EU would be a negative for the U.S. universal banks since costs could increase and capital markets activity could weaken," analysts wrote in a report Thursday. "Banks may have a two-year transition period and we'd expect the banks to experience both revenue and expense headwinds during the transition."
One of KBW's particularly dour outlooks involved Morgan Stanley, which analysts said might see an impact of up to a 9 percent decline in earnings. The bank declined to comment to CNBC.com.
The report also predicted banks' expenses would be boosted if the U.K. elects to exit, something that would only add to Wall Street firms' headaches in an environment where regulators are pushing for broader capital cushions and central bankers have hurt margins by virtue of prolonged low interest rates.
Using a recent comment from JPMorgan Chase CEO Jamie Dimon that 25 percent of the company's U.K. staff could be impacted by a Brexit, analysts extrapolated that percentage and applied it to other banks' staffing totals. Both JPMorgan and Goldman Sachs are potentially positioned for the most negative fallout if a Brexit goes through, they said. JPMorgan did not respond to a request for comment.
In terms of head count, the bank that would see the biggest impact from a Brexit is Goldman Sachs, KBW analysts wrote. More than 1,600 thousand staffers, or 4.4 percent, may see change on the way, the report said. The bank did not respond to a CNBC.com request for comment.
It is widely expected in the finance industry that a Brexit would have a more painful impact for banks in the U.K. and the EU. While U.S. banks were down, more or less matching market benchmarks in early Thursday trading, bank stocks in the EU fared worse. The report notes analysts "expect the impact of Brexit to be a wash for U.S. universal banks" in the long run.
"We believe Brexit would be the worst-case scenario for stocks and companies with EU/U.K. exposure since a Brexit could lead to contagion fears and slowing growth," they wrote.