Blog article
See all stories ยป

Who is going to replace Lehmans?

The finance industry is losing many of its major names as the crisis begins to bite. Some of the names may stay but they are now owned by behemoth banks who just get bigger and bigger. We are going to move into the future with a market that has less independent banks but a few massive global financial conglomerates. This narrowing of the field is a cause for concern as the concentration of assets under control brings a near monopoly flavour to choose by the investor.

It's not possible to be all things to all men and big often stifles innovation as the; layers of management slow down progress. In short great big dinosaurs could be being built without the necessary agility to innovate and move quickly to take advantage of new trends. This will probably mean an increase of takeover by the bigger banks of smaller more aggressive and imaginative financial services firms.

However there is also a strong possibility that large industrial companies could enter financial services. We have already seen that Tesco is increasing its presence and other Supermarkets could follow suit utilising their high street brand and retail outlets to encourage people to use their financial services. It will be a small step for Tesco to build a direct connection to the electronic market place offering executions to their orders captured at the till.

Google could easily become a financial services player and for that matter Microsoft and eBay. What these names all have in common is the brand awareness of the investor but also brand comfort. As respected names in the market lose their reputation because the crisis and the rather unflattering image of hugely wealthy traders trampling over the man in the street to ensure a bigger bonus, the chance of replacing them with a brand built on trust and certainty of delivery has its attractions.

Further down the industrial route is the very large corporate for example  BP, Shell and Unlilever  who could transform their treasury departments into trading rooms gaining direct market access and disintermediating brokers who have been the guys taking much of the blame for bad investment decisions.

September 2008 may go down in history as the month the old market died but excitingly when a new market was born.   

3589

Comments: (5)

Siddharth Udani
Siddharth Udani - Consulting - London 10 October, 2008, 10:34Be the first to give this comment the thumbs up 0 likes

Interesting! well i believe both are 2 different things. Investment Derivatives and thier discounting techniques had created such a massive bubble of virtual money that had to get into HUGE debits some day! But the Corporate giants getting into financial services is a bit different, thier focus on LOB is never diversified. Its just an extn of thier product line into financial services being serviced by the same players.. for instance GE does most of financial services for ASDA!!

But to the topic who would replace Lehmans? i would say (purely my views) no one is required! Its just one of the brokers died by creating too much virtual money..

-s

A Finextra member
A Finextra member 10 October, 2008, 10:42Be the first to give this comment the thumbs up 0 likes

Thank you for your comment

I dont think Lehman is the last to go and a big hole in FS is going to be produced and i think it will be filled but by who?

Steve Ellis
Steve Ellis - Finextra Research - London 15 October, 2008, 06:08Be the first to give this comment the thumbs up 0 likes

Two answers come to mind:

- the biggest and most successful PE companies have the swagger of the investment banks, many of their staff come from investment banks, and they can play with their own capital, they just need to extend service offerings (where it makes sense)??

- or, how about the old investment banks will be replaced by different, newer investment banks??

A Finextra member
A Finextra member 15 October, 2008, 08:24Be the first to give this comment the thumbs up 0 likes

Thank you for your comment Steve

Yes i think there will be some changes in the banking sector to fill gaps left after the crisis. There is a narrowing gap between some companies and the market and it would be simple for some firms to move into it. Virgin is one that has been hovering and could make a bigger move. I suspect that many firms will wait and see what regulatory changes are forthcoming after the crisis and what new capital requirements will be

A Finextra member
A Finextra member 17 October, 2008, 02:01Be the first to give this comment the thumbs up 0 likes

You would be better off following my financial advice so why not me?

Gary Wright

Gary Wright

Analyst

BISS Research

Member since

19 Sep 2007

Location

London

Blog posts

277

Comments

369

More from Gary

This post is from a series of posts in the group:

MiFID

A place to discuss MiFID


See all