This came out today...buy on rumor???
U.S. brokers seen being gobbled up by banks
By Cal Mankowski
NEW YORK, April 7 (Reuter) - More and more brokers and investment banks are likely to be
acquired by commercial banks as a Depression-era federal law separating the two businesses falls
by the wayside, analysts said Monday.
As for the most likely acquisition candidates, it all depends on a particular bank's strategy, said
Perrin Long, an independent analyst.
A.G. Edwards Inc ( A.G. Edwards Inc ) or Edward D. Jones & Co would be logical partners for
banks interested in the retail side of the business, he said.
"If a bank wants to be in trading, it might look at Salomon Inc ," Long said, while Lehman
Brothers Holdings Inc offers capital markets and trading.
If a bank wants exposure to capital markets plus a major clearing operation, Donaldson Lufkin
and Jenrette Inc would be a candidate.
Long said Alex Brown Inc and Bankers Trust New York Corp , which announced a $1.7 billion
merger agreement yesterday, were "a good fit."
"I think Alex Brown will make a great contribution to Bankers Trust over the years," he said.
"I can't argue that some people think the price is a little high, but it looks reasonable to me."
Analysts say regional brokerage firms will be candidates for acquisition by the big regional
banking powerhouses that have resulted from a wave of banking mergers since the 1980s.
Both Chase Manhattan Corp and Citicorp , the two largest U.S. banks based on assets, have said
they are interested in acquiring investment management companies.
Speculation about mergers of financial service firms picked up earlier this year after the
announcement of a merger between Dean Witter Discover & Co and Morgan Stanley Group Inc .
Although neither is a commercial bank, the deal unites one of the largest retail brokers with a
leading investment bank.
Although the 1933 Glass-Steagall law separating commercial banking and investment banking is
still on the books, the Federal Reserve recently raised the limitation on how much underwriting a
bank can do through its securities affiliate. The percentage limitation applies to the volume of
underwriting in relation to the revenue of the securities affiliate.
There are several proposals in the U.S. Congress to change the laws and remove barriers
between investment banks, commercial banks and insurance.
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