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 Morgan Stanley said 62 percent of investors polled at its European
financial industry conference said the negatives of having a global
banking business outweighed the benefits as regulations had "become
overbearing" for the largest firms.
Only 28 percent of investors said the benefits of being a large and
truly global firm outweighed the negatives, and 10 percent of the 60
people polled were undecided.
"We found it striking that some management teams are seeking to make
their businesses simpler, and we believe investors would reward the
restructuring potential if strategy is clear and perceived as
achievable," Morgan Stanley analyst Huw van Steenis wrote in a note
to clients on Wednesday.
Thirty of the world's biggest banks are dubbed global systemically
important banks, or G-SIBs, which must hold between 1 and 2.5
percent extra capital from the start of 2016 and also have a buffer
of debt that can absorb losses, so they are less likely to collapse.
These banks, which include HSBC, JPMorgan , Citigroup <C.N> and
China's ICBC <601398.SS>, also typically come under extra scrutiny
from national regulators.
Banks, particularly many in Europe, are cutting down in size to save
costs and simplify their operations.
"We were struck by how many of the management teams we met are
trying to reconfigure their business, whether through stretching
cost cutting goals via digital in the UK and Nordic banks or
shrinking investment banking or addressing balance sheets, such as
in Italy," van Steenis said.
He said legacy systems, bad loans and businesses not making returns
above their cost of capital remained material challenges for the
firms, however.
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A majority of investors at the conference said they expect European
banks to raise at least 20 billion euros ($21.5 billion) more equity
this year.
Morgan Stanley said 41 percent of investors polled said banks would
raise 20-30 billion euros, 9 percent expected them to raise 30-40
billion and 13 percent expected them to raise 40 billion or more.
A majority of investors said they expected the European Central Bank
to require banks it regulates to hold core capital of at least 11
percent in the future.
($1 = 0.9304 euros)
(Reporting by Steve Slater; editing by Susan Thomas)
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