Shrinking US Banks Become Models for Financial Restructuring in the Industry

Strategic Insights -

Financial institutions in the US, particularly Citigroup and Bank of America, are selling off businesses at an unprecedented rate, becoming the models for current US deal activity in the financial services industry. Gary Parr, vice chairman at Lazard, notes that the rearranging of portfolios, identifying what's core and non-core, is extremely active. This trend has led to a surge in financial restructuring deals, providing opportunities for big-name dealmakers like Alan Schwartz. As a result, smaller US players and foreign institutions, particularly those in Latin America and Asia, are poised to acquire assets from shrinking US companies.

Key Takeaways:

  • Citigroup and Bank of America are leading the trend of US banks selling off businesses, with Bank of America having sold several stakes in foreign institutions and its Canadian credit card business.
  • Both companies continue to pare down their portfolios, as do other large financial institutions, with some number of buyers expected to be smaller US players.
  • Gary Parr expects Latin American and Asian financial institutions to play a more significant role in acquiring assets from shrinking US companies.
  • Selling a big investment bank today is considered highly challenging or impossible, making restructuring a necessity for financial institutions.
  • Financial restructuring deals have been extremely active, driven by the need for banks to reorganize their portfolios and reduce capital intensity.
  • Big-name dealmakers like Alan Schwartz are taking advantage of the trend, facilitating large-scale acquisitions and partnerships.

Statistics:

  • Citigroup has sold a controlling stake in its Smith Barney brokerage unit to Morgan Stanley.
  • Bank of America has sold several stakes in foreign institutions and its Canadian credit card business.
  • Financial restructuring deals have been so active that they have provided opportunities for big-name dealmakers like Alan Schwartz.
  • 50% of book is a benchmark for valuations, according to Alan Schwartz.
  • Gary Parr noted that 100% of these assets think they are core.

Sources:

  • (TheStreet) --- Dan Freed, NEW YORK,
  • Bloomberg Dealmakers Summit