“(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 biggestinvestment banks, raising doubts about their future profitability. These questions make the biggest global investment banks “un-investable,” wrote analyst Kian Abouhossein, who himself works atJPMorgan, one of the biggest global investment banks.
Breaking up large “universal banks,” could unlock value for shareholders, Wells Fargo analystMatthew Burnell wrote in a report on Wednesday. These “financial supermarkets” typically house investment banking, consumer banking and wealth management operations under one roof.
If these banks broke up into smaller companies, the value of the parts would likely be greater than the current whole, Burnell wrote. He estimated that universal banks currently trade at 25 to 30 percent below publicly traded financial firms that focus on just one business.
CLSA analyst Mike Mayo, a long-time critic of big banks, wrote on Tuesday: “Almost every investor that we speak with indicates that a breakup would be bullish for the stocks.” …”
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