For big banks' trading desks, the day after Britain's vote to exit the European Union was exceedingly busy and at times painful. Soon, the concern could be the potential calm after the storm.
The lasting "Brexit" fallout for banks is ultimately unpredictable at this point. But for the rest of the year, bank analysts and investors are bracing for lower trading activity that often comes when investors head to the sidelines during a period of heightened geopolitical and financial uncertainty.
At money management firm Neuberger Berman, clients flocked to dial in to conference calls the money manager set up Friday to discuss what the U.K. vote would mean for markets. Several calls reached the maximum number of available lines, said George Walker, the firm's chief executive.
In the longer term, the vote will lead to more uncertainty about the economy's direction, potentially sapping the market activity banks need to generate trading results. "This is not helpful," Mr. Walker said. "It will reduce growth and increase uncertainty."
Trading desks didn't have much time to think about that on Friday. Like banks around the world, J.P. Morgan Chase & Co. was scrambling through the night to deal with frantic trading and panicky markets.
At some points, the bank had more than 1,000 tickets per second on its spot foreign-exchange electronic execution platform. And J.P. Morgan traded more than four times its typical amount?north of $60 billion?on its foreign-exchange platform in Asia. Fueled by coffee, Red Bull and pizza, an estimated half of the firm's FX traders in London and New York worked through the night.
"There were no issues," said Daniel Pinto, CEO of J.P. Morgan's corporate and investment bank and head of Europe, Middle East and Africa. "At no point did we have to stop provisioning liquidity to clients," which is Wall Street terminology for helping them buy and sell securities. Some banks had warned they would have to reduce their capacity to trade electronically with clients to protect themselves against volatility.
Citigroup Inc., where many traders also worked overnight, throughout the week has put a $10 million limit on certain forex orders placed through electronic platforms. It didn't put the same restrictions on orders placed by phone.
Given markets' wrong view that the U.K. Brexit vote would keep the country in the EU, many investors may be caught on the losing side of trades. Yet J.P. Morgan's Mr. Pinto said that so far all margin calls required have been met.
In terms of the market volatility, "this is totally uncharted territory," adds Henry Raine, head of the London office for bank consulting firm Promontory Financial Group.
The sharp reductions in equity prices may hurt the bottom line for some banks in the second quarter. But the third-quarter issue might be investors staying out of markets until there is more certainty about the U.K.'s path and Europe's response.
Mike Mayo, an analyst with CLSA, predicted Brexit would leave a 10% dent in the quarterly earnings of the five biggest Wall Street banks as investment banking in particular takes a hit. "This is an earnings event, versus a balance sheet one," Mr. Mayo said. "This is bad volatility, not the healthy kind in normal markets," Mr. Mayo added, noting debt-trading businesses would struggle in the aftermath.
Glenn Schorr, a banking analyst with Evercore ISI, adds that while foreign exchange might be a bright spot of heavy fee-generating activity for the banks, they will also have to deal with slower underwriting and merger related businesses along with the potential of continued markdowns in the stock portfolios.
It is "a near-term earnings issue for all" banks, he wrote.
Christina Rexrode contributed to this article.
Write to Emily Glazer at email@example.com and Justin Baer at firstname.lastname@example.org