Charles Bobrinskoy, vice chairman of value investing firm, Ariel Investments, discusses future course for investment banks like Morgan Stanley and Goldman Sachs as they try to shrink, in light of the drop in revenue and trading. He is commenting in view of the recent announcement from Morgan Stanley to cut jobs.
SUMMARY:
-- He thinks that the number of investment banks will be smaller going forward, given the new regulatory environment in which they will be operating.
-- He thinks that is a good strategy as that will free up cash to be returned to shareholders.
-- Fixed income business has grown by leaps and bounds in the last decade but will be a much smaller business going forward at all the investment banks.
-- It is a very tough operating environment for investment banking as people sit on tons of cash and refuse to trade.
-- Still, financials are very cheap at this point. Some of these stocks are trading at all time lows.
Credit and Source: Bloomberg
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