Ok, since I've spent the last week trying to predict NCAA outcomes (and because everyone on here loves to rank stuff) I thought it would be fun to try something similar on the oasis. Here's the deal: The year is 2050. Who are the the Top-10 i-banks going to be and in what order? There really are no rules. Banks can already exist or they can be made up. For example, if you think GS and MS will merge to form GoldmanStanley...go for it. If you think Suntrust will muscle their way to the top, that's cool too. The only catch is that after you rank your Top-10 you need to give a decent (or at least creative) explanation for why you think it will be the case. Let's get started...
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That's actually an awesome idea. The trouble is that I don't want to start. Anybody else? You post, then I'll post too.
Contrary to these hippie bastards currently dominating the airwaves, there is no global warming.
In the year 2037 the earth will descend into an ice age. Half the world's population will die.
Those left will just be trying to survive.
There will be no investment banks.
Mis Ind however will be leading a colony settled in what is today Mexico. Thanks to her katana wielding skills she kills all potential rivals and mesmerizes the remaining tribes people with poems about "The Warmer Times." Secure in her power, she rules in harmony, aside from occasional clashes with neighboring tribes, until her peaceful passing.
Yeah, actually investment banking is just what I'm doing while I'm waiting for the world to end. Then my intended role as Supreme Warlord of North America will become clear. There may be no investment banks, but we'll pick that bronze bull up from Bowling Green and Broadway and cart it around wherever we go, chanting the holy consonants: "G S M S M L".
So when the ice age starts, folks, you need to show up at my doorstep with signs saying, "Save Us Mis Ind" so that I know not to cut you down.
Now that I mention it... it's snowing outside in mid-March. Beginning of the end?
if anything, it will be like this in my view:
GS will be acquired by the Citi giant.
Then, the IB division will be spun off because of conflicting interests in consumer/commercial banking and investment banking (the -ve sentiment is alive right now as well)...leading to Salomon, Goldman, & Sachs Co (aka) SGS.
On the other hand, MS and Merrill will have a merger of equals to prevent loss in individual market shares resulting in MorganStanleyMerrillLynch aka MSML.
BofA will buy JP Morgan Chase outright, and the consumers will go one way and the investment bankers will then become "JP." (brand equity)
Wachovia and WaMu will be bought by HSBC and no name changing will occur
UBS will eventually take over a big number of smaller boutiques under their own name.
I feel the IB industry to react in a panicky way should one major acquisition take place. just like the pharmas did in the 90s.
That's pretty well-considered, Kreatif. The only thing I'm wondering about is how GS is going to be acquired by Citi without further depressing Citi's not-so-great share price. There'd be no way to acquire GS without paying a massive, unheard-of premium. Wouldn't it be funny if, during acquisition negotiations, someone hostile then acquired a bunch of Citi shares on the cheap, got a significant amount of people on the board, and took Citi in a different direction?
thank you for the appreciation Mis Ind.
Granted Citi is a major value stock right now, considering their 2007 year end forecast by wallstreet analysts to be 60+. but you also have to realize that they went up from 50 to 55 in 2.5 months and were well on their way into acheiving the core (=valuation) status when the Chinese market follow on and sub-prime woes came about. in any case, the stock market reaction is unsystematic to any individual stock. so, in my opinion, regardless of whether the market grows in a few years or not, the LBO possibilities of GS by Citi still exist very strongly because:
1) Citi has immense (read gargantuan) credit resources, it has one of the largest credit arms in the world + they public debt ratings have not been hampered either.
2) There is a lot of organic and inorganic growth in the company (Mainly China, Middle East, and India). you might have read that article about Citi hiring 1,000 retail/consumer bankers in china alone in a year or so...blah blah...
3) the CEO is on his way out, no body likes him, but he has a very strong board of directors, and one of them will get promoted, this will create more investor confidence.
4) the company would be willing to pay a premium for GS because: a) the eventual spin-off will carry the brand equity, and bring the capital back to investors. b) when the divisions are on their way separately, they will become more efficient, and yes, more capital will pour in.
Afterall, what would be bigger? GS or Citi CIB today versus "SGS" tomorrow with equity interest from CitiConsumerBank and thus mad access to the largest private credit platform. (think LBO financing), not forgeting the synergies from their capital markets S&T, half of the teams will get fired in both cases. meaning half the cost centers, and 2x(++) the revenue
lethal, if you ask me.
wow - kreatif, that seems ridiculous and possible
Yep. K makes some good points.
in fact, i'm so hyped up right now, i'm meeting with Prince and Blankfein right now...lol
If Citigroup bought out GS, wouldn't the same thing happen as when CSFB bought out DLJ? Citi pays crazy bonuses to all the bankers to convince them to stay, all the GS bankers happily accept, and after a year, folllow a superstar out to another outfit (most likely a boutique) where they can set their own culture.
From what I understand, Citi's culture and GS' culture are almost polar opposites.
What are the big differences between Citi and GS cultures?
StreetLuck: my whole prediction is relying on Citi's credit platform. why would a GS banker not want to be a part of the new "SGS" if they were able to cheaply provide LBO/restructure financing directly and privately through Citi's consumer/commercial/corporate banking base, not involving any third party creditors (like they currently do). the Kd (Debt cost of capital) would be much less than ever possible at boutiques. bankers realize that, and they know that no matter who the best banker is, their pitches/proposals have to be the most financially sound. we should also realize that this acquisition will greatly enhance the combined companies' underwriting abilities. just think of the capital base in terms of volume....this is what Salomon, Goldman, & Sachs will provide. I vote aye!
Edit: one more point worth considering, last time I checked Citi was #4 in US Comp M&A, and Goldman was #1, but globally, Citi is #1...what does this indicate considering the rest of the world is developing fast....GS would want to be a part of Citi in a few years, just because of sheer size and financing capabilities.
ridiculous statement. Why the hell would GS want to change anything about their business model?
if you had read before posting, you would have known that i mentioned my reasons before stating my conclusion (prediction).
Take note of this paragraph in particular referring to GS:
So Citi has advised on more deals than GS, but is making less than half of what GS is on advisory fees. The way I interpret that is: Citi is selling itself at rock bottom prices right now to climb up in the league tables, which they have been successful at. They are banking on making up the loss of revenue through their other products. How long can they sustain this though? If Citi's bankers are getting paid as much as GS' bankers, then it is because Citi is taking a hit on profitability their IBD to retain bankers and build up business.
Also, going back to the DLJ example, from what I can understand, CSFB was offering them guaranteed bonuses for 1-3 years to get the best bankers to stay, but the best bankers still left taking their followers with them. If money was the only consideration, a lot of the old DLJ bankers might have stayed at CSFB.
StreetLuck: your points are all valid, I'm not even contesting that. we all know the differences between GS and Citi. These are in fact all the more reasons for Citi's interest in a hostile takeover.
My point of view is that, the better GS gets, the more likely Citi would want them. As far as employee retention is concerned, if you look at Citi now, every group has their totally independant culture, and I think this will apply for the GS management/senior bankers as well. Also, if you remember when Citicorp and Travelers (Salomon Bros) merged, all Salomon people took over the management, and ousted people like John Reed. I can see a reverse management takeover by competent GS managers as well - there is no doubt in my mind they would lead the joint groups as heads.
Referring back to what you mentioned earlier about GS bankers taking bonuses and leaving, you would have to make financial sense for clients to move with you. As my whole view is relying on Citi's credit platform (balance sheet), no banker would think about leaving a powerhouse like that. This is a similar case with brokers, why do they work with ML/MS/Smith Barney when they can go their own way? because of the corporate giant platforms, corporations provide a huge advantage in financing capabilities that others can not, and thus they are the market leaders. a similar analogy would apply here.
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