The banking industry could look different in the near future as the cost of being a big bank today might not be profitable, Lazard Vice Chairman Gary Parr told CNBC on Monday.
"For the very large institutions, there is an obvious dis-economy of scale, and that's capital. They have to carry so much capital," Parr said in an interview on"Squawk Box."
Parr was responding to a recent Goldman Sachs report that concluded that JPMorgan Chase should potentially think about breaking up its business. Goldman CEO Lloyd Blankfein told CNBC last week that financial services companies may soon rethink what their business mix will look like.
Deal watchers should not wait for significant changes in the makeups of big banks for at least two years, he said. For one, while regulators want the big institutions to be smaller, splitting them is not easy because the entities that emerge from a breakup must be self-sufficient. Another reason, he said: The capital markets and liquidity for major investment banks is still developing.
Breakups could shape up a number of ways, Parr said, such as a rearranging of a bank's portfolio, with some banks specializing in wholesale or retail. They may also become more geographically split.
There are service businesses that could arguably be taken out of the banks and trade very well, he said. Activists will be on the hunt for services that would trade at higher multiples than the overall banks were they to be split off, he said.
If banks cannot show shareholders that combinations of services create enhanced value, then those disparities will create an environment where investors will call for breakups, Gary Kaminsky, vice chairman of wealth management at Morgan Stanley, said on "Squawk Box."
"Asset management traditionally trades at a multiple greater than the market, than the S&P. Investment banking traditionally trades at a multiple less, so if the combination creates more value, generates more cash, that's fine. But if it doesn't, that's just a numbers game," he said.
On the one hand, JPMorgan's management team has a better chance than many to make things work across segments, Parr said. On the other, if that endeavor proves too expensive, management will take action and do something on its own.
"These institutions are very large, very complex and hard to manage, and so it takes a very special management team to figure out all of those components to make them work effectively," he said.
It will also take some time for consolidation in the energy patch to kick in following the oil price slide that has put pressure on energy companies' balance sheets, he said, noting that deal making usually lags major dislocations as firms adjust to survive.
"It's probably going to be a relatively quiet period for a time as people adjust. And then look for a lot to happen, because a lot needs to happen," he said.
Using mergers and acquisitions as a barometer of confidence in the market, Parr said the U.S. economic cycle is only in the sixth or seventh inning and there's still room to grow. "We've really only had really two years—a little less than two years—of what shows as real confidence, and the economy is good, liquidity is good, borrowing capacity is good. In other parts of the world, it's harder to say."