At some point in the not-too-distant future, the math won't make sense anymore for banks to keep plowing cash into buying back their own shares. When that happens, a climate for deals finally could develop.
In that case, JP Morgan and Goldman Sachs both could emerge as significant players, broadening their reach not directly into banking but rather into ancillary industries that will help the Wall Street institutions grow, according to an analysis Monday by Keefe, Bruyette & Woods.
Buying other banks does not appear to be much of an option at this point, in part because the biggest institutions already are at their deposit caps and would need regulator approval before taking on another institution.
"Over time, we believe Universal Banks will return to the M&A market in larger-size deals in order to increase scale in businesses that are higher return or in businesses that will lead to scale and efficiency opportunities," KBW analysts Brian Kleinhanzl and Michael Brown said in a report for clients.