This Day On The Street
Continue to site
ADVERTISEMENT
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

KBW CEO Joins Call for Big Bank Breakup

NEW YORK ( TheStreet) -- Big banks are likely to break themselves up to appease investors, even though a wholesale government-mandated breakup isn't going to happen, Keefe Bruyette & Woods (KBW) CEO Thomas Michaud argued Wednesday.

"I think the market's telling us that it has to happen. If you look at the six universal banks in the country and you pull out Wells Fargo (WFC), the remaining five trade at 65% of tangible book value," Michaud said during a panel discussion at a community banking conference hosted by the financial services-focused investment bank. Referring to Morgan Stanley (MS - Get Report), Goldman Sachs (GS - Get Report), JPMorgan Chase (JPM - Get Report), Citigroup (C - Get Report) and Bank of America (BAC - Get Report), Michaud said "these are the biggest banks in the nation and I think that's unsustainable. Either the banks' performance has to get better or if book value's real they're going to have to realize it on behalf of shareholders."

Michaud agreed with fellow panelist and KBW Washington analyst Brian Gardner that the big banks will slowly be scaled back over time rather than in one sweeping effort.

"This is not an AT&T moment. This isn't Standard Oil," Gardner said. "You're not going to turn around a year from now and see one of the megabanks broken up into six baby megabanks. That's not going to happen." However, Gardner pointed to rules forcing big banks to hold increasingly large capital buffers and "a movement among the regulators to really come down hard on the largest banks."

Jumping off of these remarks, Michaud pointed to reports Morgan Stanley may look to sell off part of its commodities division, saying, "I think you'll see things like that, and you'll see they'll continue to hone the companies, but I think they're too big and I think there's going to continue to be deleveraging." Alluding to his audience of smaller bank CEOs, he added, "I think that's going to be an opportunity for a lot of people in this room."

Michaud then cited recent research his company has done to commemorate its 50 year anniversary, noting that in 1962 "Bank of America was the largest in the nation and had 5% of the nation's assets. Today, JPMorgan has 17% of the nation's assets. That's just too big."

There has been a steady drumbeat of calls for breaking up the largest banks ever since the 2008 financial crisis. However, the topic picked up steam recently when ex-Citigroup chief Sandy Weill, who may have done more than any living person to popularize the big bank model, said he no longer thinks it makes sense.

-- Written by Dan Freed in New York.

Follow this writer 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

Portfolio Manager Jim Cramer and Director of Research Jack Mohr 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

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
SYM TRADE IT LAST %CHG
BAC $17.88 0.00%
C $58.46 0.00%
GS $205.07 0.00%
JPM $68.53 0.00%
MS $38.84 0.00%

Markets

Chart of I:DJI
DOW 17,689.86 -56.12 -0.32%
S&P 500 2,103.84 -4.79 -0.23%
NASDAQ 5,128.2810 -0.5040 -0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs