24/7 Wall St.
09-26-2008, 11:21 AM
24/7 Wall St. Daily News
http://www.247wallst.com/images/2008/09/26/citigroup_logo_2.gif (http://247wallstreet.typepad.com/.shared/image.html?/photos/uncategorized/2008/09/26/citigroup_logo_2.gif) There is one interesting irony in this whole financial meltdown we are witnessing which will go against the entire fabric of what many will want to admit. Citigroup Inc. (NYSE:C) and the financial supermarket model may actually be the model emulated by the entire banking and brokerage sector. Citi's performance and execution have not been successful, but if you look at what is happening in the banking and brokerage sectors right now it is almost impossible not to see the exact parallel now.
Last year, Wachovia (NYSE: WB) essentially doubled its brokerage and financial advisory business last year with its acquisition of A.G. Edwards. Wachovia is more troubled than cross-town rival, so this is still an open book and unfinished story with an unknown outcome.
JPMorgan Chase (NYSE: JPM) acquired Bear Stearns in a government orchestrated bailout buyout earlier this year, which arguably may have been a real estate grab more than an operational grab. But much of the brokerage, clearing, management and trading operations were kept on. It has also just bought the assets and deposits of Washington Mutual (NYSE: WM) this morning for a song. Oddly enough, it was apparently willing to buy WaMu for around $8.00 per share earlier this year.
This last weekend marked a monumental change in the bulge bracket broker dealer and investment banking firms. Goldman Sachs Group (NYSE: GS) and Morgan Stanley (NYSE: MS) changed their charters to bank holding companies. Now many think it is just a matter of time before these firms start buying up cheap deposits. Warren Buffett even invested $5 billion into Goldman Sachs this week. Interestingly enough, Morgan Stanley shed its Discovery credit card operations to get out of the credit card business, but it may be back in that business sooner than anyone would have guessed a year ago.
Bank of America (NYSE: BAC) earlier had been exiting certain underwriting and investment banking operations, but it has recently just doubled down in its buyout of Merrill Lynch & Co. (NYSE: MER). It also acquired Countrywide for its mortgage operations in a highly criticized move. We think that was possibly a mandated rescue package, but that is a different story entirely. B of A is also up against the deposit ceiling caps imposed on U.S. banks, so new deals will have to be elsewhere in the financial services sector if it wants more deals.
So take a look at Citi of today. It is a bank, credit card issuer, makes loans, has investment brokers and financial planners, underwriting, and trading. Vikram Pandit has made some layoffs and has restructured its units. But the overall financial supermarket model has at least so far been kept intact.
JPMorgan is buying its way up into even more of a major player and is one of the healthiest on Wall Street and Main Street. Bank of America is becoming an institution looking more and more like Citigroup, albeit a far more successful version. When Goldman Sachs gets involved in a banking deal, then that business will be transformed too. Unfortunately, the stocks of Wachovia and Morgan Stanley are being punished hard after WaMu's failure this morning as more concerns that their counterparty risks and default risks are rising faster than they can combat them.
Citigroup is going to be an interesting case study for the future at many universities for their capstone classes. Imagine having your business model vindicated after years of criticism, but still managing to fail in the execution and delivery of that model.
Jon C. Ogg
September 26, 2008
http://feeds.feedburner.com/~f/typepad/RyNm?i=WFMXL</img> (http://feeds.feedburner.com/~f/typepad/RyNm?a=WFMXL) http://feeds.feedburner.com/~f/typepad/RyNm?i=ph65L</img> (http://feeds.feedburner.com/~f/typepad/RyNm?a=ph65L) http://feeds.feedburner.com/~f/typepad/RyNm?i=zxjIl</img> (http://feeds.feedburner.com/~f/typepad/RyNm?a=zxjIl)
complete story here... (http://www.247wallst.com/2008/09/sick-twist-of-f.html)
http://www.247wallst.com/images/2008/09/26/citigroup_logo_2.gif (http://247wallstreet.typepad.com/.shared/image.html?/photos/uncategorized/2008/09/26/citigroup_logo_2.gif) There is one interesting irony in this whole financial meltdown we are witnessing which will go against the entire fabric of what many will want to admit. Citigroup Inc. (NYSE:C) and the financial supermarket model may actually be the model emulated by the entire banking and brokerage sector. Citi's performance and execution have not been successful, but if you look at what is happening in the banking and brokerage sectors right now it is almost impossible not to see the exact parallel now.
Last year, Wachovia (NYSE: WB) essentially doubled its brokerage and financial advisory business last year with its acquisition of A.G. Edwards. Wachovia is more troubled than cross-town rival, so this is still an open book and unfinished story with an unknown outcome.
JPMorgan Chase (NYSE: JPM) acquired Bear Stearns in a government orchestrated bailout buyout earlier this year, which arguably may have been a real estate grab more than an operational grab. But much of the brokerage, clearing, management and trading operations were kept on. It has also just bought the assets and deposits of Washington Mutual (NYSE: WM) this morning for a song. Oddly enough, it was apparently willing to buy WaMu for around $8.00 per share earlier this year.
This last weekend marked a monumental change in the bulge bracket broker dealer and investment banking firms. Goldman Sachs Group (NYSE: GS) and Morgan Stanley (NYSE: MS) changed their charters to bank holding companies. Now many think it is just a matter of time before these firms start buying up cheap deposits. Warren Buffett even invested $5 billion into Goldman Sachs this week. Interestingly enough, Morgan Stanley shed its Discovery credit card operations to get out of the credit card business, but it may be back in that business sooner than anyone would have guessed a year ago.
Bank of America (NYSE: BAC) earlier had been exiting certain underwriting and investment banking operations, but it has recently just doubled down in its buyout of Merrill Lynch & Co. (NYSE: MER). It also acquired Countrywide for its mortgage operations in a highly criticized move. We think that was possibly a mandated rescue package, but that is a different story entirely. B of A is also up against the deposit ceiling caps imposed on U.S. banks, so new deals will have to be elsewhere in the financial services sector if it wants more deals.
So take a look at Citi of today. It is a bank, credit card issuer, makes loans, has investment brokers and financial planners, underwriting, and trading. Vikram Pandit has made some layoffs and has restructured its units. But the overall financial supermarket model has at least so far been kept intact.
JPMorgan is buying its way up into even more of a major player and is one of the healthiest on Wall Street and Main Street. Bank of America is becoming an institution looking more and more like Citigroup, albeit a far more successful version. When Goldman Sachs gets involved in a banking deal, then that business will be transformed too. Unfortunately, the stocks of Wachovia and Morgan Stanley are being punished hard after WaMu's failure this morning as more concerns that their counterparty risks and default risks are rising faster than they can combat them.
Citigroup is going to be an interesting case study for the future at many universities for their capstone classes. Imagine having your business model vindicated after years of criticism, but still managing to fail in the execution and delivery of that model.
Jon C. Ogg
September 26, 2008
http://feeds.feedburner.com/~f/typepad/RyNm?i=WFMXL</img> (http://feeds.feedburner.com/~f/typepad/RyNm?a=WFMXL) http://feeds.feedburner.com/~f/typepad/RyNm?i=ph65L</img> (http://feeds.feedburner.com/~f/typepad/RyNm?a=ph65L) http://feeds.feedburner.com/~f/typepad/RyNm?i=zxjIl</img> (http://feeds.feedburner.com/~f/typepad/RyNm?a=zxjIl)
complete story here... (http://www.247wallst.com/2008/09/sick-twist-of-f.html)