Just when the Irish banks thought they might have finally turned the corner following the crash of 2008, Brexit happens and all talk of dividends, stock market flotations and deleveraging suddenly needs to be re-examined.

Since the shock result of Britain's referendum on its European Union membership last Friday, some €2.7 billion has been wiped off the market value of Bank of Ireland, which has extensive operations in the UK, and €301 million from Permanent TSB, which is still 75 per cent State owned.

They both bounced back a little on Tuesday – Bank of Ireland was up 10.6 per cent with PTSB up 1.7 per cent – but the paper hit for taxpayers from this meltdown amounts to €604 million.

Bank of Ireland’s exposure to the UK is the biggest of the three domestic banks. It accounts for 40 per cent of its balance sheet and 25 per cent of its profits, so any Brexit-related recession would have an impact on what has been a growth business in recent years for the bank.

For now, Bank of Ireland is maintaining radio silence on the likely impact from Brexit and we might have to wait until the publication of its interim results on July 29th for a clearer picture to emerge.

But in advance of the referendum, the bank was keen to highlight how its UK business is consumer focused – through a branch network in Northern Ireland and retail partnerships in Britain with the Post Office and the AA – and is separately licensed and regulated, and separately capitalised. So the mothership is protected in a worse-case scenario.

However, a recession in the UK would clearly be bad for business and have a spillover effect in Ireland, with the Minister for Finance Michael Noonan saying on Monday that our GDP growth could be 0.5 per cent lower next year as a result of Brexit.

British chancellor George Osborne on Tuesday signalled that Britain would now need to raise taxes and cut spending later this year to stabilise its public finances.

This is clearly an unhelpful backdrop for a consumer-focused business while the weakening of sterling means a lower contribution in euro terms from the UK to the Bank of Ireland group result.

Dividends

Bank of Ireland had signalled its intention to pay a dividend next year, its first since the crash. Eamonn Hughes, a banking analyst with Goodbody Stockbrokers, has suggested that the bank might delay paying this dividend in a bid to protect its capital base post-Brexit.

And PTSB had already delayed the sale of the rump of its CHL buy-to-let mortgage book in the UK until after the referendum as the uncertainty over the outcome had made it difficult to attract buyers.

Some £2.3 billion of CHL mortgages remain in place and PTSB was supposed to have disposed of these by June 30th under the terms of the State aid restructuring plan agreed with the European Commission last year.

PTSB can’t be forced to sell this book for less than 90 per cent of its face value, which is a positive. But as CHL is loss-making, the delay in selling this non-core asset is not helpful to the Irish bank.

Then there's the IPO of AIB. It was talked about last year before being put off until after this year's general election. It has since been postponed until 2017 due to weak equity markets.

Some commentators see the second half of 2017 as the likely date for an IPO but that will depend on markets and the strength of the Fine Gael-led minority Government, which has to negotiate a budget in October.

The department of finance says it will only IPO shares in AIB if it yields a good return for taxpayers, who bailed it out to the tune of €20.8 billion. That’s fine but there’s only so long you can talk about an IPO before actually executing on a deal.

AIB’s unique selling point is that it is a good proxy for the Irish economy, which happens to be the fastest growing in the EU at present. A Brexit-related recession clearly threatens that narrative.

In trading terms, AIB is a niche players in the UK, with about 300,000 customers across its First Trust branch network in Northern Ireland and its business banking operation in Britain.

The uncertainty created by Brexit has just added to the problems that the Irish banks already faced – increasing regulations, rising capital requirements, and a low interest rate environment.

We won’t know the full extent of the impact for some time to come but it’s unlikely to be positive.

Twitter: @CiaranHancock1