Financial markets await with bated breath as Britons take to the polls on Thursday 23 June to vote on a historic referendum to decide whether Britain will exit from the European Union (EU). Australians can expect final poll results around 4:30PM AEST on Friday 24 June, however early predictions place the likely outcome as Britain remaining in the EU (aka a “Bremain” vote).

If Britain exits the EU (a “Brexit” vote), leading investment bank Societe Generale says a global sell-off would ensue, leaving no market unscathed. On the flip side, Societe Generale believes a Bremain vote would dispel uncertainty for European stocks, especially banks, leading to a rebound in the short term.

This makes me think CYBG PLC CDI 1:1 (ASX: CYB) (“Clydesdale Bank”) could be the best stock to own for a Bremain scenario. Here’s why.

About Clydesdale Bank

Clydesdale Bank is the by-product of National Australia Bank Ltd’s (ASX: NAB) two prior acquisitions of the Clydesdale Banking Group in 1987 and Yorkshire Banking Group in 1990. Clydesdale Bank demerged from NAB on February 8 this year, ending NAB’s 29-year foray into the UK.

The Australian listed Clydesdale Bank is a CREST Depository Interest (CDI) designed to enable trading on both the Australian and London stock exchanges. The CDIs mirror trading of London-listed CYBG Plc., on a currency adjusted basis. Accordingly, investors of Clydesdale Bank are banking (pun intended) on the prospects of its counterpart’s shares in London.

Company fundamentals

Brexit fears aside, Clydesdale Bank appears cheap. In its first half update as a stand-alone entity, Clydesdale Bank reported annualised mortgage growth of 9.8% and an increase in net interest margin – a lead indicator of profitability – up 2 basis points to 2.25%.

Impressively, Clydesdale Bank’s common equity tier-1 (CET1) ratio increased to 13.2%, in-line with Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp’s (ASX: WBC) comparative international CET1 ratios. This places Clydesdale in the top quartile of banks, globally.

Downside risk

Clydesdale Bank currently trades on a book value of less than 1, implying Clydesdale Bank’s assets are worth more than its market capitalisation. This makes it cheaper than each of Australian and New Zealand Banking Group (ASX: ANZ), CBA, NAB and Westpac, which all trade at a premium to book value.

A downside risk for Clydesdale Bank, however, is if Britain chooses to exit the EU on Thursday. A majority of its assets are linked to the UK housing market (approximately 55% as at 31 March 2016), meaning any uncertainty following a Brexit could spell disaster for consumer confidence. This, in turn, may hurt house prices sending future earnings (and its share price) lower.

Foolish takeaway

Whilst a Brexit would likely result in a sell-off of most major bourses (and bank stocks), given the higher probability of a Bremain scenario, I believe buying Clydesdale Bank is a good way to position your portfolio for this outcome.

Although its shares trade near all-time highs, the bank is still cheap by Australian standards, making the current price a good risk-reward trade off.

Why These 3 Blue Chip Shares Are Set to Soar in 2016

Discover The Motley Fool's Top 3 blue chips for 2016. These 3 'new breed' shares pay fully franked dividends AND offer the prospect of significant capital appreciation. Simply click here to gain access to this comprehensive FREE investment report.

No credit card required!

HOT OFF THE PRESSES: Motley Fool’s #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.

Motley Fool contributor Rachit Dudhwala owns shares of National Australia Bank Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.