Looking back in the last six months at the evolution of the investment banking sector, and particularly the leader banks, we come up with the series: 5-4-2-0. Although I acknowledge that the transformation of Goldman Sachs and J.P. Morgan in banks under FED supervision is only a strategic move in order to be able to raise the finances they need easier than before, it's still a shock when I think "the pride of Wall Street is practically inexistent now". That is because to me Wall Street stands for "high-risk, high gain". However, the Wall Street Primadonas will have to limit their gains to moderate sums if they don't wanna risk being trapped in another "bankruptcy snowball".
And now, it's not only US that's in trouble...Europe comes along. It was actually high time for the crisis to reverse on our shores. Otherwise, it would have been atypical to everything that I have studied at the university. We look at the UK, known for its "no involvement policy", who nationalizes 2 banks in less than a year. We go more East, and find Hypo Real Estate Bank from Germany seeking governmental loan and Fortis, who's playing tennis with its ABN AMRO branches bought only last year.
From the Fortis and Wachovia's stories, I conclude that when you're in trouble, raising the needed finance is the sole purpose. What else can I understand from the fact that Fortis is thinking about selling ABN AMRO branches just one year after having acquired them? And now all I know about M&A seems to be contradicted by reality. Scared of bankruptcy, banks don't think about organizational issues, PMI costs, nor about their employee morale anymore. Quick money raise is their sole religion. However, the impact of all those M&A will show up on medium term, after the crisis is over, on the profitability of the involved banks. As a consequence, the current liquidity and solvency issues will be replaced by profitability issues.
But in the end, who is thinking about what saving money for the future if now you're starving?
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