Analysts discuss paradigm shift: breaking up banks
Source: Reuters
At least three Wall Street analysts this week have written reports about the possibility of the biggest banks breaking themselves up to boost profitability, signaling that investors may be more willing to embrace an idea that is still toxic to some lawmakers in Washington.
New regulations in areas like capital requirements are imposing higher costs on the biggest investment banks, raising doubts about their future profitability. These questions make the biggest global investment banks "un-investable," wrote analyst Kian Abouhossein, who himself works at JPMorgan, one of the biggest global investment banks.
Breaking up large "universal banks," could unlock value for shareholders, Wells Fargo analyst Matthew Burnell wrote in a report on Wednesday. These "financial supermarkets" typically house investment banking, consumer banking and wealth management operations under one roof.
... Under a proposal from senators David Vitter, a Louisiana Republican, and Sherrod Brown, an Ohio Democrat, banks with more than $400 billion in total assets would face an additional capital surcharge. The bill would also prevent banks' riskier affiliates from accessing government support such as deposit insurance.
Read more: http://www.reuters.com/article/2013/04/12/us-usbanks-breakups-analysts-idUSBRE93A19020130412
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