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) -- Love them or hate them,

Goldman Sachs

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Morgan Stanley

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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


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Bank of America

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as well as European players such as

Deutsche Bank

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Credit Suisse

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-- 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


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