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The new era of banking triads | Advantage Banking

Allianz Feature

It’s not a diatribe

Well, there used to be the Triads of Investment Banking in the last couple of Decades, the issuers and “propah” bankers at Merrill Lynch versus the debt guys at Lehman, junk issuers from countless hedge funds and even PE funds, and the not so bi brothers but quality issuance branded by JP Morgan and the eventual Big Brother Goldman Sachs. Watching them and playing hardball for their access to deposits were Citi and Bank of America, Citi thinking itself to be above the rest, the wannabes that took the LTCM down with prudent policy and other legal blackmail on the trading floor were again the Citi, BNP Paribas, SocGen, UBS, Credit Suisse and the Triad of Triads the sole loanee and the backstops DB, HSBC and AIG.

Of the mentioned, in the last group both HSBC and DB survived losing only 30% of the book, Barclays RBS and AIG sunk without a trace, Lehman was the only one left out in the cold as the street itself had no idea any of these Triads could fail. These were giant ecosystems, and thus Lehman had to get access to only private lenders and survive in the “Mysterious Ethics Central Park” show from the bankers

That is also why my readers and I give up on history after a while. It gets to sound like one preachaholic to another to another, when everyone is busy building the new triads, really. The big markets are China, Latin America and India. The bigger dealmakers also starting to come from these economies. The bigger investors have survived in the US, Middle East and China and Korea, but they are also invested in the same securities and gold again. That is then the raw materials.

What else does a bank need? It needs a sense of the markets needs, desires and a foot in the “propah” banking space like Wells Fargo and JPM. It needs banking licenses like Goldman Sachs is doing and it needs up front investment in government speak. Thus rural distribution is likely to actually roll out despite discussion of market forces etc because of governments leaning on rural empowerment in Brazil and India (NREGA) the unbanked have a micro-financing structure which is again underwriting by looking at who else has cleared you for a loan, overleveraging and destroying the 20% of its customers that were credit worthy to begin with. Scale in consumer financing in urban areas and in unsecured loans ( cars and cards) invests in the same moral hazards in underwriting and the same warehousing and inflation spirals in the BRIC the N11 and the trillions of dollars heavy US market While US markets growth has started mirroring developing economies after the volatile 2 year period just past, it is limited as most consumers are already over leveraged in the retail and wealth segments and have to whittle down their loan capacity to catch down with the joneses. Bt first and foremost for any personal expense, it is still economically more viable to use a bank intermediary from salaries to house and car to disposable income and investments.

Then there is the Corporate market. The Economy’s push globally means more A grade borrowers are available for loans, more short-term money market debt is being rolled over and more jobs are being created every month. Despite more limits being imposed on Private Equity, Bank Leverage and Financing for larger projects today, there is a regular supply to meet all the infrastructure project requirements without overly bankrupting public accounts at any of the major government economies. Current Account surpluses are being invested freely by China and Korea while USD remains dominant currency.. However with all this going on in a pretty much inflationary state everywhere, there is a concomitant danger of debt yields and benchmark rates moving up increasing our evaluation of systemic risk by maybe even 2-3 times?

We would still need backstops if we are to effectively allow the retail market to start growing as the warehousing and the refi terms are mandatory. The CRE market has not sorted itself out either with a trillion there waiting to unwind without the counterparty being paid. In other words here is nary a cautionary tale in our concept of growth and new risk is about to change that. However, banks would grow bigger and better, and as of now our children will have a brighter future than you. More later..

2 comments on “The new era of banking triads | Advantage Banking

  1. Pingback: Tweets that mention The new era of banking triads | Advantage Banking | The Banking and Strategy Initiative --

  2. mary
    April 5, 2010

    Facing Challenges of Brazilian Private Equity: Part II…

    Financial Transparency

    This is perhaps the mother of all issues when considering the more common challenges in successfully raising private equity capital. And it’s not an issue solely relevant to Brazil and/or Latin America, as it is an issue facing any early-stage or middle-market company worldwide looking to raise capital via the private equity market. It is the subject of much frustration among private equity professionals and company executives alike, and perhaps the single most common reason why most potential transactions reach an unfortunate and untimely death.

    For free access to full article visit:


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This entry was posted on April 4, 2010 by in China, Emerging Markets, Financial Services, Global, Private Equity, Retail Lifestyle, Uncategorized, US and tagged , .


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