Tags: Gorman | bigger | banks | consumers

Morgan Stanley's Gorman: Get Ready for Even Bigger Banks

By    |   Thursday, 10 July 2014 02:43 PM

Many financial experts have expressed dismay that since the end of the 2008 financial crisis, the largest banks have grown even larger.

Well, the critics ain't seen nothing yet, says Morgan Stanley CEO James Gorman.

In the future, "ample opportunities will continue to exist for big global banks in providing large-scale finance for corporations, institutions and governments," he writes in The Wall Street Journal.

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"Inexorable consolidation will make the big banks even bigger. Economies of scale and the boundary-less nature of electronic technology will doom most small institutions."

Meanwhile, asset management will grow into the largest area of financial services, "as users of capital become providers of capital in newly developed economies and an aging global demographic creates an inevitable shift from consumers to savers," Gorman says.

"Technology will continue to breed competition and disintermediation. Traditional consumer banking will come under extreme pressure as its central deposit-taking and lending functions are challenged by online savings vehicles, crowdfunding and loan syndicating by such nontraditional competitors as insurance companies, pension and hedge funds," he explains.

"Universal adoption of mobile devices puts a bank branch in everyone's pocket and renders bricks and mortar obsolete," Gorman adds.

The growth of the middle class around the world also will boost asset management, he writes. That demographic "will create an enormous pool of savings in search of investment, for which they will seek professional advice and execution.

"Of the 97,000 bank branches that exist across the U.S. today, all but about 10,000 will disappear. Those remaining will become social gathering places where people go to be educated about finance, engage in discussion groups about savings and investment and, at the high end, get exclusive exposure to luxury goods and services."

Size is just one of experts' worries about banks. The Office of the Comptroller of the Currency (OCC), which regulates banks, has expressed concern about the easing of banks' lending policies.

"Competition for limited lending opportunities is intensifying, resulting in loosening underwriting standards, particularly in indirect auto and leveraged lending," according to the OCC's semiannual risk report. "Easing in underwriting and increased risk layering is also occurring in commercial loans."

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Economy
Many financial experts have expressed dismay that since the end of the 2008 financial crisis, the largest banks have grown even larger.
Gorman, bigger, banks, consumers
377
2014-43-10
Thursday, 10 July 2014 02:43 PM
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