Also in this playlist...
This transcript is automatically generated
Much -- next guest says the Federal Reserve is forcing mergers in the banking business are let's talk about it now Thomas and -- shows the CEO at TV -- Investment bank -- to rang the opening bell eight go at the NYSE this morning fiftieth anniversary of the firm that'd be pretty cool right.
And their stock exchange issue with us now in studio you couldn't -- 25 years that right I have -- -- -- no other job is that right out of college and I want one and only job you don't hear that very often but so -- I joined the firm and had 75 employees.
Today we have close to 500 and -- Didn't interest in credit as -- driver of did 9/11 tragedy -- Montana yes thank you it was it's been remarkable in many ways.
But certainly a place that I'm honored to lead to right now.
All right now let's talk about backing a little bit and the idea of more merger and acquisition activity and the Federal Reserve policy leading us -- that gives us.
What you think is gonna happen here sure.
First of all the banking industry is always consolidating the big issue is at what pace and we think a lot of the regulatory changes that are going on right now are -- pressure profitability.
For many of the smaller banks.
And -- and also to I would say the near zero interest rates is applying lot of pressure.
We think you're gonna see a pickup in deal activity primarily in -- mid and smaller bank level.
What about the bigger banks because we always think about and I -- -- is the very large percentage of assets than in the hands of the largest banks -- -- and -- or going to get smaller he.
We think so and I and I think you might be referring to the big global cities -- strategically important financial institutions -- -- the global universal banks yep when you go back and look over time there concentration in the banking industry's unprecedented.
When we founded our firm in 1962 BankAmerica had 5% of the nation's assets today JPMorgan has 17% of the nation's assets.
So we think that the peak of the concentration -- probably been reached.
And now over time you'll see some of the banks that are smaller than these bigger banks.
-- couple a bit more of the share.
This are real important point though because we argued about it -- 08 after the crisis -- -- you saying -- break up the banks and no movement for lack of a better term.
Is really gonna pick up steam here that the big banks will be broken up.
I'm not sure they will be broken -- That in a very big way it may happen gradually over time but they're going to be forced to.
And I think that that is the single most important policy response that's happened since the crisis.
Also their stocks tend to trade at a fraction of book value.
That is not a sustainable.
And either the management's in the environment are are gonna change in the way -- the management strategies may not the management's but the be a change in the -- better performance.
Or they're gonna have to sell assets of book value to realize that for shareholders of the potential acquisition targets have you do you already see the stocks of those.
The public if they're publicly traded reflecting that potential not really -- Not really because we're still well off the pace of the big emanate years so we we think that those stocks are still attractive for investors.
You could see it in the size of the premium that the buyers have been paying.
You're now seeing premiums of 35% -- more.
In open bank deals where there's two publicly traded stocks that's higher than usual.
So that suggests that the deal premiums aren't in the stocks interest things be money some some money to be made how small are we talking about in terms market capsized about.
Patel we this is -- is we go pretty deep but I I think that you're gonna see I think the sweet spot in banking is going to emerge between that's because it's a little bit less regulated than any stress tested banks -- and have some of the other regulations.
And we can be the sweet spot here to see banks in Mac had a lot of other bank did you -- stuff and thank congrats by the way on the fifty years Chang W but thank distressed I find very much always -- -- -- -- I -- -- -- -- of -- I have to.
-- -- -- -- --
Filter by section