Today's WSJ explores the extent to which diversification has protected universal banks – with a broad spectrum of business lines and enormous balance sheets – from the upheaval caused by the collapse of the subprime mortgage market and the lack of liquidity in debt markets. The article focuses on the big three: Citigroup, JP Morgan Chase, and BofA.
"These banks rarely hit on all eight cylinders at the
same time, but they can make a pretty good profit on hitting on six out
of the eight," says Robert Maneri, a portfolio manager at KeyCorp's
Victory Capital Management in Cleveland.
They may be withstanding the turmoil relatively unscathed for now, but risk remain:
How the credit crunch can hurt universal banks:
- Debt underwriting slows
- Fewer mortgages to originate
- Servicing defaulted mortgages is costly
- Weaker markets hurt money-management units when investors sit on cash
- Hedge-fund business loses its luster
- Fewer mergers and leveraged buyouts
Read more:
Do-It-All Banks' Big Test
Universal Model So Far Weathers Credit Crunch,Remains Controversial
By ROBIN SIDEL
Wall Street Journal
September 6, 2007; Page C1
