Here’s How Value Can Be Unlocked in Big Banks
Investors love to bellyache about the lackluster performance of bank stocks. But if you’re sick and tired of it, there’s something you can do.
Shareholders should agitate for the big banks to break up. So says, former FDIC chair Sheila Bair on CNBC’s Fast Money Halftime Report.
“Substantial shareholder value could be unlocked if they were broken up.”
Bair’s comments come in response to insights made by former Citi chairman Sandy Weill on CNBC Wednesday morning.
“What we should probably do is go and split up investment banking from banking, have banks be deposit takers, have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail,” Weill tells CNBC’s “Squawk Box.”
Bair takes the idea a step further. She points the finger at 3 banks. They are JPMorgan , Citigroup and BofA . “Mega-banks trade at steep discounts to tangible book value,” she reminded.
Although she didn’t come out and say break up these specific banks, she did say “their shareholder value is not impressive,” and in the context of the conversation suggested that stock holders would benefit if they were smaller entities.
In their current form, “(These) banks are too big to manage centrally,” Bair said. “And they’re too big to regulate.” But pull apart the pieces and value could explode. “You’d get better efficiencies … with institutions more focused on core business.”
Trader Mike Murphy, founder and managing partner at Rosecliff Capital, agrees with the thesis. As a professional investor he’d like to see the financials perform better and says “there could be real value generated by a break-up.”
“The market should really take the lead on this,” Bair concluded. It could be a win-win.
What do you think? We want to know!
Posted by CNBC's Lee Brodie
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Trader disclosure: On July 25, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Joseph Kinahan is long BAC, SHORT PUTS; Joseph Kinahan is long C; Joseph Kinahan is long GS, SHORT PUTS; Joseph Kinahan is long WFT, SHORT PUTS; Joseph Kinahan is long CSCO, SHORT CALLS; Joseph Kinahan is long FB, SHORT CALLS; Joseph Kinahan is long MSFT, SHORT CALLS; Joseph Kinahan is long F, SHORT CALLS; Joseph Kinahan is short SPY CALL SPREADS; Brian Kelly is long XHB; Brian Kelly is long CAT; Brian Kelly is long GE; Brian Kelly is long GLD; Brian Kelly is long LLY; Brian Kelly is long PEP; Brian Kelly is long QQQ; Brian Kelly is long TLT; Brian Kelly is long TIP; Brian Kelly is long EURO; Brian Kelly is short EUROSTOXX 50; Michael Murphy is long AAPL; Michael Murphy is long SBUX; Michael Murphy is long T; Michael Murphy is long VZ; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long USB; Joe Terranova is long GS; Joe Terranova is long JPM; Joe Terranova is long YHOO; Joe Terranova is long SBUX; Joe Terranova is long NKE; Joe Terranova is long AAPL; Joe Terranova is long EMC; Joe Terranova is long NXPI
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