ML-Implode News - Michaud: "TBTF Banks Will Break Themselves Up"

"JPMorgan Chase is a trillion dollars bigger after the crisis than it was before the crisis. That's almost unfathomable. You've got these big banks that were too-big-to-fail and their response was to get bigger," Michaud [CEO of Keefe, Bruyette & Woods] says.
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"The reality is we are not going to get a Glass Steagall re-enactment," heÂ says before adding, "the regulators are going to force the boards of directors to make that decision on their own because it is in the best interest of their shareholders."
New rules are punitive enough that too-big-to-fail banks will have no choice but to trim down. The leverage that once gave megabanks their competitive advantage -- and the ability to make money in virtually every corner of the market -- is gone. CEOs are increasingly finding it hard justify many of their businesses to impatient shareholders.

"The regulatory drumbeat is going to cause the biggest banks to disaggregate," Michaud says, pointing out that General Electric GE -1.24% divested most of its financial services operations last year because simply wasn't as lucrative. He adds, "I have a lot of respect for Citigroup's current management team. But they sell a business almost every few weeks I didn't even know they owned."

... Michaud hasn't invited FORBES to his offices just to wax about Wall Street's biggest firms, but he sees their challenges as an opportunity for a different group of lenders -- a crop of regional banks between $5 billion-to-$50 billion in assets such as Bank of the Ozarks in Arkansas, Columbia Banking System in the northwest, Pinnacle Financial in Nashville, and Eagle Bancorp in Maryland -- which are taking market share and growing far-faster than the Citi's and the JPMorgan's of the world.

... KBW believes there are about fifteen of these regional firms -- they call them "challenger banks" -- that have the ability to transform banking in the United States. They have the capacity to sharply increase their lending, and grow their footprint both through normal expansion and mergers. KBW sees a further ten firms including Silicon Valley Bank, EverBank, First Republic Bank, East West Bancorp and Signature Bank, which are developing niche technologies and novel business models that are winning customers from larger firms without the focus.

Relevant:

Michaud: "TBTF Banks Will Break Themselves Up"