NEW YORK, Feb. 3, 2015 /PRNewswire/ -- Is it possible for big banks to become less risky, attractive investments again? With the surge in regulatory scrutiny on big global banks, unprecedented fines and mounting pressure from shareholders seeking improved returns, The Edge Consulting Group forecasts select financial institutions are perfectly ripe to announce they will strategically spinoff or divest their 'core retail/commercial banking assets' over the course of the next two to three years.
"Strategically, it sings common-sense to separate commercial banking - public money - from the riskier investment banking and asset management divisions", states, Ryan Mendy, COO of The Edge, the global event-driven investment advisor.
"Big banks are a value maze that can recover significantly if smartly restructured. Management aren't aware of the value unlocking potential for investors and conglomerate discount applied that the current complexity causes", continues Mendy.
The Edge's report finds it could boost uneven financial performance of banks, evidently release trapped value that's associated to the riskier investment divisions and ultimately create a new peer group class. Their report reveals if executed, the re-rating would dwarf the costs associated with such a large divestiture [spinoff] plan; citing opportunities for banking powerhouses like: Bank of America, Citigroup and JP Morgan Chase in the US, and from UK, Europe & Asia, Credit Suisse, Deutsche Bank, HSBC Holdings and UBS AG.
As revealed in their recent 15 year study of global spinoffs with the corporate advisor Deloitte, The Edge believes that post spinoff, share performances of commercial banks could be replicate that of the approximant 800 international spinoffs from all sectors that saw an average return of +48% for investors two years after separation from their previous parent company.
At a glance, looking at shareholder returns over past 10 years, The Edge could have a very good point as the above named banks have generated an average return of -24% vs. the relative +75% from the S&P500 index. Compare that with the listed Commercial Banks that have given investors returns of +102% on average, namely First Republic Bank, Wells Fargo, SVB Financial Corp and US Bancorp.
To enquire or access The Edge's research, visit www.edgecgroup.com or via Twitter @edgecgroup
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SOURCE The Edge Consulting Group
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