Seeking Alpha

BofA, Citi, and JPMorgan are Buys on break-up potential, says MKM

  • "The break-up of the universal banks is inevitable," says MKM Partner's David Trone, "not a question of 'if,' but 'when.'" Managements clearly disagree, but they're more interested in what's best for them, not the shareholders, says Trone, and it's only a matter of time before activist investors come knocking.
  • Initiating coverage on BAC, C, and JPM with Buy ratings on each because their break-up will release "significant pent-up shareholder value," Trone says be patient. "We see little chance of this emerging within the next twelve months."
Comments (17)
  • wyostocks
    , contributor
    Comments (7608) | Send Message
     
    Buy on the possible break up value?
    Truly nuts.
    21 May, 03:57 PM Reply Like
  • vman
    , contributor
    Comments (142) | Send Message
     
    Who would want to buy all the skeletons in the BAC closets??? NEW headlines are floating around about an SEC investigation of BofA and Schwab (SCHW) over money laundering violations. And the beat goes on... like down to $9-10 area.
    21 May, 05:25 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8132) | Send Message
     
    Yes...finally an analyst who gets it!
    21 May, 04:00 PM Reply Like
  • jackooo
    , contributor
    Comments (1484) | Send Message
     
    No break up in my life time!!!!
    21 May, 04:09 PM Reply Like
  • papayamon
    , contributor
    Comments (1058) | Send Message
     
    That is, until there is a breakup in your life time.
    21 May, 04:11 PM Reply Like
  • vman
    , contributor
    Comments (142) | Send Message
     
    Jackoo... I'm sorry to hear that you do not plan to live much longer. Usually your comments are pretty good... we will miss you.
    21 May, 05:37 PM Reply Like
  • READ THE PAPERS
    , contributor
    Comments (154) | Send Message
     
    It doesn't have to be break everything up; just a few strategic spinoffs, like BAC spinning off Merrill, Citi spinning off it brokerage operations, JPM spinning off its credit card division (which Dimon hates anyway). Any of these deals in 2-3 years would be substantiually accretive to shareholders.
    21 May, 05:44 PM Reply Like
  • joeo6334
    , contributor
    Comments (31) | Send Message
     
    BAC could spin off US Trust.
    22 May, 09:51 AM Reply Like
  • ThreeWest
    , contributor
    Comments (2) | Send Message
     
    Congress can't even fix the tax code that everyone knows is broken. No way they agree to delve into private enterprise and start breaking up global banks. Wouldn't be necessary if Glass-Stiegle was still law.
    21 May, 06:27 PM Reply Like
  • Hello Again 83
    , contributor
    Comments (428) | Send Message
     
    Very positive for BAC and the other banks. Very encouraging.
    21 May, 07:45 PM Reply Like
  • FXTrading101
    , contributor
    Comments (41) | Send Message
     
    You don't need a breakup to occur in order to make $$. Just a possibility that floats around is enough to have significant gain from this point. I've been dreaming about BAC breaking up from MER.
    21 May, 08:27 PM Reply Like
  • ote
    , contributor
    Comments (167) | Send Message
     
    I think the break up of the big banks would be wrong from an international competitive position. The other non USA big banks around the world would stay big and suck up all the multinational and international business. This would significantly hurt USA competitiveness.

     

    But in the current environment breakup of the big banks would release value. Example if BAC broke up into 6 regional banks plus a Merrill spin off. I expect it would release value in the current environment. I expect all their boards have discussed this. I think they are just waiting for the banker hate to fade. The pound of flesh must be paid. Heads on spikes etc.

     

    To be honest if they started breaking themselves up, standup politicians from both parties would find back room ways to slow and stop it. Else occupy wall street types have taken control.

     

    Does anyone think the 5 big banks in Canada or 30 big banks in Europe, Japan, China.... etc would be broken up in sympathy. Hog wash. The nation needs big banks.
    21 May, 08:38 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8132) | Send Message
     
    Spoken like a true capitalist.
    22 May, 05:45 AM Reply Like
  • ote
    , contributor
    Comments (167) | Send Message
     
    DeepvValueLover, guilty as charged
    23 May, 01:10 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8132) | Send Message
     
    Be careful of what you write...capitalism is politically incorrect these days.
    23 May, 03:10 PM Reply Like
  • plateofeggs
    , contributor
    Comments (16) | Send Message
     
    I used to think breaking up a bank like BAC was a bad idea. Now I'm all for it. The problem is, after all these years, people are still really uncomfortable with the business in totality and what else will come out. I cannot foresee a point when people will all of the sudden be comfortable with it. That question of what other skeletons are in there from Countrywide will remain for the next decade. So now I agree with the break up/spin off model. There will be people who want to invest in the former countrywide business. There will be those of us who would hold onto the Merrill and straight banking businesses as well. It just makes sense now because there are two totally different groups of investors in BAC and neither is happy.
    23 May, 11:14 AM Reply Like
  • FXTrading101
    , contributor
    Comments (41) | Send Message
     
    BAC doesn't need to be broken up to many little banks, just Merrill and Countrywide, and yet still remains competitive. The point of breaking up is to unlock its value, and I'm sure people will be pushing for it if the shares keep languishing in the teens. At this current price it's hard to imagine that's a combination of 3 of the biggest, or close to the biggest, companies of their respected industry.
    23 May, 07:12 PM Reply Like
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