Following the Brexit vote last week that rocked financial markets, TheStreet's Jim Cramer says despite the fact that many of the U.K. and European banks have good credit and liquidity, he wouldn't be surprised if the banks asked for a government bailout.
"Over there I expect it, because they are so leaderless and the situation's so confused; it wouldn't shock me," says Cramer, founder and manager of the Action Alerts PLUS portfolio. "A couple of banks are acting as if they need another bailout."
"That is a hobbled bank," Cramer says.
Shares of Barclays (BCS) - Get Report tumbled almost 20% and Royal Bank of Scotland's shares fell 11.33%, after trading was halted on the London Stock Exchange earlier Monday, while Lloyds Banking Group's (LYG) - Get Report shares slumped more than 14.5% following Great Britain's vote to leave the European Union.
U.S. banking stocks also took a hit Monday, Cramer says, in part because no one wants the European banks' common stock and "that is what is bleeding over into our financials."
The KBW Banking Index is down 4.27%, while individual stocks like Bank of America (BAC) - Get Report fell 5.54%, Citigroup (C) - Get Report dropped 3.65%, Wells Fargo (WFC) - Get Report was down 1.25% and JPMorgan Chase (JPM) - Get Report declined 3.10%.
The British selloff is affecting U.S. financials, which makes U.S. financial stocks cheaper, Cramer highlighted.
"Our financials are insanely cheap, so they are just going to go to super-insanely cheap," following the Brexit vote, Cramer says.
Issues investors are concerned about include the regulatory environment, how banks that used London as a base for European Union operations may have to adjust, and the devaluation of the British pound.