This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Goldman, Other Vampire Squids Will Go Hungry

Stocks in this article: MS GS BAC UBS CS C

NEW YORK ( TheStreet) -- Love them or hate them, Goldman Sachs (GS - Get Report), Morgan Stanley (GS - Get Report) and other global investment banks have shown a remarkable capacity over the past few decades to come up with new ways to make money.

But those days are over, according to JPMorgan analyst Kian Abouhossein.

"We see no real innovation within the industry to create new products which will drive the growth story in investment banking revenues," Abouhossein said in a report.

As a result, Abouhossein expects global investment banks -- a group that includes not just "pure-play" investment banking companies like Goldman and Morgan Stanley, but also diversified U.S. giants such as Citigroup (C - Get Report) and Bank of America (BAC - Get Report) as well as European players such as Deutsche Bank (DB), Barclays (BCS), UBS (UBS) and Credit Suisse (CS - Get Report) -- to split into winners and losers, with the losers massively scaling back their operations.

But it is the losers, a group Abouhossein refers to as Tier II, that makes the better investment, because they are already well on their way to restructuring -- cutting staff and compensation, and returning capital to shareholders.

Abouhossein singles out Credit Suisse and UBS as his top picks in Tier II, though he also includes Morgan Stanley in that group

The eventual winners, according to Abouhossein, "will undertake limited restructuring at this point and hence will likely trade at a discount to book value until the market feels that ongoing market share gains are more permanent than cyclical."

It may take more than 18 months for the market to finally acknowledge the winners, so he expects that group to trade at a discount for the foreseeable future, even though they will get a short-term lift from what Abouhossein argues will be a strong first quarter of 2012.

-- Written by Dan Freed in New York.

Follow me on Twitter

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,461.16 +73.95 0.43%
S&P 500 2,032.74 +3.19 0.16%
NASDAQ 4,708.4770 +26.98 0.58%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs