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Tangent Capital Partners managing director Chris Whalen gives his outlook for big banks.
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So they're -- plenty of calls for the banks to break -- my next guest says -- -- split but not because of regulation joining me now is Chris Whalen.
Tangent capital partners senior managing director at some really interesting note.
-- you think that they will break up but not for the reasons that we were all thinking why do you think.
Well it's changes in the business you know all about it most cash businesses don't really make money on the floor -- average dealer the Fed is a big component.
-- street firms are making any money on inventory there's no repo so -- that part of the business which was code required profit -- was counted on I was gone.
So it's a tough time right know for especially for broker dealers -- -- customers of the big banks it does seem like.
That the big banks they've worked so hard to become these giant conglomerates Jaffe don't want to do this and that even if it doesn't make sense to State's tough.
Tough stuff but they're gonna fight -- -- third now that's that you don't.
Citibank JPMorgan -- I don't see them doing this.
Really -- Wells Fargo involuntarily -- but ended up appealed through retail business that they go through Wachovia.
And none of these businesses are stable right now they're taking money away from new sponsors.
The -- -- minimum assets under management all of the things you would expect in their driving a lot of professionals in two smaller.
Broker dealers are stored in her own businesses have been paying their license with the Merrill for example -- Morgan Stanley -- -- -- -- advisors -- their -- businesses.
So that the industry is breaking up de facto.
And to me the only question is -- -- samaritan couldn't change of Morgan Stanley right we've stopped talking about building an asset management business because I don't think it makes sense.
My brother have sales trading and investment.
Palin when will that narrative trade when I when you cease coddling all of America selling Merrill I think got happens much sooner because it's portable.
-- -- it to some extent but I think could console -- very easily.
-- you make sense.
Merrill still confident out separately or as -- higher out there have you thought -- I haven't looked at the mechanics of it you could do we have our I think -- would put -- and offering no I think would do best value proposition.
Merrill would probably take its legacy liabilities with the -- could go up thirty billion plus.
In no litigation exposure because of -- mortgage mess.
Just by themselves so I think it does make sense it's a big enough business.
But the thing is don't it is really important -- -- -- banks they're still -- in the -- -- to do the customer of JPMorgan or something else.
That has a deposit but he -- -- Goldman Sachs.
I'm an independent Merrill -- -- -- -- they don't but what does it mean for the investor -- the market what's the take away.
I think the takeaways -- -- the value proposition is not in these big integrated firms I think you really have to look very hard today.
If you were starting over with a blank piece of paper what businesses would you be -- -- -- investment banking probably some degree institutional sales trading -- very.
Really don't you would pick those -- that you would put capital into and probably avoid the rest you might not -- fixed income trading.
You know for cash for example.
Derivatives dealer community it's hard to pick and choose but on -- -- -- the big sought to do everything under a lot of pressure.
Counsel -- it's a crystal banks cannot thank you.
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