The biggest of the pieces would include the bank’s branch network, which Goldman says could be worth over $100 billion on its own. JPMorgan’s investment bank would be nearly as large, followed by its commercial bank and an asset management company.
Goldman says that even splitting JPMorgan in two—dividing the investment bank from the traditional bank, returning the company roughly to what was allowed before the Glass Steagall Act was repealed in the early 2000s—would boost the overall value of the current bank by 16%. “Our analysis indicates that even accounting for lost synergies, a JPM breakup would be accretive to shareholders in most scenarios,” wrote Goldman analyst Richard Ramsden in the report.
Banking reform advocates have long called for the nation’s biggest banks to be broken up. The so-called too big to fail problem has received plenty of attention since the financial crisis. Many believe the government in late 2008 was essentially forced to bail out the nation’s banks in order to avoid a deeper recession.
Some think new regulations have addressed the too big to fail problem. Others, including some prominent bankers, think big bank break ups would make sense. Sandy Weill, who was the CEO of Citigroup when it became the first of the nation’s modern mega-banks, now says he believes breaking up the large banks makes sense.
But this is the first time Goldman has called for a bank bust up. Ramsden says the new capital requirements for big banks proposed by the Federal Reserve in early December make now a good time to consider such a split. Under the proposed Fed rule, JPMorgan, because of its size, would be required have enough capital to cover 11.5% of its riskiest assets.
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