Spain's IBEX-35 Sees Biggest One-Day Drop in Its History After 'Brexit' Vote -- Update

By Jeannette Neumann and Carlos López Perea 

MADRID -- Spain's IBEX-35 plunged down to close at 12.4%, the biggest one-day drop for the benchmark index in its history, as the political and economic uncertainty unleashed by the U.K. referendum result hammered the shares of Spanish companies.

International Consolidated Airlines Group SA, the airline company that owns British Airways and Iberia and is listed in London and Madrid, led the losses on Friday to close down 26.9%.

Friday's drop trumped the previous record for the greatest one-day plunge on Oct. 10, 2008, when the IBEX-35 fell 9.14%. The index was launched in 1992.

Bankia SA, which is still majority owned by the Spanish government after a 2012 bailout, saw its shares go down 20.8%.

Banco Santander SA, which generates about a quarter of its net profit in the U.K. by selling mortgages and other products, fell 19.9%. Shares in Banco de Sabadell SA, which owns TSB Banking Group PLC in the U.K., fell 19.3%.

"Brexit" could trigger a sustained depreciation in the pound versus the euro, analysts say. A prolonged decline in the British currency will hit Spanish companies' earnings in the U.K. when translated back into euros when the companies' report quarterly and annual results.

Albert Coll, institutional policy and market relations director for Sabadell, said the market was overreacting. TSB will represent around 20% of Sabadell's net profit by the end of 2016, Mr. Coll said. If the pound would fall as much as 10% this year, he said, that would trigger a 2% decline in the bank's net profits. That is manageable for Sabadell, Mr. Coll added.

Santander Executive Chairman Ana Botín, who ran the British unit before taking the helm of Santander, said in a statement after the vote that the bank's commitment "to British businesses, customers and our people remains as strong as ever." Santander's retail banking business provides the bank stability, she added.

Spanish telecommunications giant Telefónica SA, which owns British mobile operator O2, fell 16.1%. Infrastructure group Ferrovial SA, which has major stakes in four airports in the U. K. -- including London's Heathrow -- was down 9.3%.

Spain is more exposed to the U.K. than other major European economies and markets, according to S&P Global Ratings.

Analysts at the credit-rating firm prepared an index of which countries would have been the most negatively affected by a British exit, based on financial and economic ties. Ireland topped that list.

But Spain came in well ahead of the eurozone's other major economies -- Germany, France and Italy.

Also, Spanish exports of goods and services to the U.K. -- which includes tourist expenditures -- represents 2.7% of Spain's gross domestic product.

Write to Jeannette Neumann at [e-mail]

(END) Dow Jones Newswires

June 24, 2016 13:11 ET (17:11 GMT)

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