Banks face further Brexit pain as relocation costs, uncertainty loom

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Big banks' stock prices may have rebounded from the hit after last month's Brexit vote, but between moving expenses and the central bank decisions that may follow the U.K.'s decision to quit the EU, the banks probably have major headaches on the horizon.

When three banks report earnings later this week, analysts and investors may hear what Wall Street plans to do to offset costs likely to come from the Brexit vote.

There's little Wall Street wants more than for the Brexit fears to be overblown. Bank executives banded together to tell the U.K. not to worry about their commitment to the region, but banks are widely expected to move some operations out of the United Kingdom. Many of them are not out of the woods yet, and the upheaval created by the Brexit vote will not come cheaply.

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"The Brexit has created a lot of uncertainty," said Kenneth Leon, global research director with S&P Global Market Intelligence. It's just going to take a while, he said, for it to play out. One of the biggest challenges U.S. banks will face comes in the form of bills big banks are likely to incur shipping thousands of staffers out of cities like London, and into EU cities like Frankfurt, Brussels or Dublin.

Many U.S. banks operating in the U.K. will likely have to relocate thousands of staffers, at what consulting firm Synechron says will be an expense of 50,000 pounds ($66,400) per employee.

For banks like JPMorgan Chase, which according to estimates may have to move anywhere between 1,000 and 4,000 employees, relocation could mean an up to $265-million headache over two years.

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In spite of the overhead increases expected to come from the Brexit vote, big banks' stocks have largely rebounded from the dive many took in the wake of the referendum. In fact, some have even posted slight gains since June 23.

"There still will be Brexit impacts," said Brian Kleinhanzl, equity research analyst with KBW. "That's not good for bank stocks, overall."

The other big Brexit headache banks have yet to face is prolonged cheap money.

Further complicating matters for Wall Street banks, the Federal Reserve's response to the Brexit vote was to scale back its expectations for a rate hike. Continued low rates, while a short-term shot in the arm for mortgage sales, will make it more difficult for big banks to turn a profit.

"We do need rates to rise to not have earnings pressure going forward," Kleinhanzl said.