"Choosing global winners and losers remains challenging because the capital markets banks do not face a level playing field. While Basel capital rules appear to be converging around the world, national regulations and potential new operating prohibitions differ," Bernstein's analysts write.
This is a cop-out. Just because the playing field is uneven doesn't mean Bernstein's analysts can't pick the winners. They list their recommendations: "Outperform" on Goldman, Morgan Stanley, JPMorgan, Citigroup, HSBC
Bernstein's analysts appear to differ from the others, however, in believing that the spoils left over after the defeated players leave the field will be worth having.
"As capacity is removed from the business, pricing should slowly improve," the Bernstein report states.
Still, this impossible-to-quantify Bernstein hunch is hardly something on which to trade. The best advice, as always, may be to stay away from investment banks altogether. Short-term traders will nonetheless try and guess who is going to be next to announce a major restructuring, since that has proven to lead to a jump in the share price for several companies.
That will be challenging, however, since analysts can't seem to agree on who has announced a restructuring and who hasn't. Remember that Soc Gen analyst Hoffmann-Becking loves Deutsche Bank's restructuring, while JPMorgan's Abouhossein doesn't mention it. And while JPMorgan's Abouhossein sees potential for Credit Suisse and Morgan Stanley to make further commitments to restructure, Bernstein's analysts put those banks in the "already announced" group.
"Already Credit Suisse, UBS, RBS, Goldman Sachs and Morgan Stanley have established expense initiatives which directly or indirectly cut back staff expenses in trading, and nearly every major capital markets firm has announced a plan to mitigate growth in risk-weighted assets," states the Bernstein report.
Most important, ultimately, will not be which bank says it is restructuring, but which actually pulls it off. A former C-suite executive at one of the above-mentioned banks recently told me winding down fixed income positions is far easier said than done. It may take years to wind down certain positions--indeed, look at Citigroup's Citi Holdings unit--and it is difficult for companies to resist the temptation to make use of the trading expertise they have on hand for the wind down to make new bets in the meantime.
All this talk of restructuring, in other words, may amount to relatively little in the end.