US broker JPMorgan Securities is warning that EUR19 billion of market capitalisation could be lost among eight top European wholesale banks as a result of the EU's Markets in Financial Instruments Directive (MiFID).MiFID aims to create greater market transparency and to ensure 'best execution' for investors, whether trading occurs on-exchange or off-exchange.
The broker says the new regulations - which are expected to be introduced in November 2007 - could have a negative earnings per share impact of as much as seven per cent on European investment and wholesale banks, and it has cut valuation estmiates on a number of firms due to increasing uncertainty.
JPMorgan has reduced its price targets on Société Générale, Credit Suisse, UBS, Deutsche Bank and BNP Paribas mainly due to concerns about MiFID.
The US firm sees the greatest potential earnings per share impact on UBS, followed by Deutsche Bank and Credit Suisse. ABN Amro's rating is lifted to overweight from underweight as it sees little impact from MiFID on the Dutch bank's business.
JPMorgan says MiFID threatens the integrated banking model and is likely to increase the market share of third-party providers. The broker says banks which are large-scale operators offering cheap execution and value-added services will survive best in a post-MiFID lanscape.
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