Its quite clear that bulge bracket banks have been hit hard. But what about the second rung and third rung of US financial institutions.Are they in a better shape or in worse condition.

This is because we know that Citi, BoA are not going to make real profits in the short term.So can we expect the other financial institutions to step forward.

QuoteOriginally posted by: AbhiJThis is because we know that Citi, BoA are not going to make real profits in the short term.Not clear. Both Citi and BoA are in a hole, but they are digging themselves out. Personally, I think rather highly of Pandit. Lewis handled the ML merger badly, but that is a one time mistake that is recoverable.QuoteSo can we expect the other financial institutions to step forward.Unlikely. The problem is that once you get outside of the mega-banks, the next tier of banks are the US regionals, and I don't see any of them wanting to expand into being mega-banks or starting trading operations. Also my general impression is that there is little correlation between bank health and size. That at each level of size from the mom-and-pop bank to the mega-banks, you have banks that are well run and those that are poorly run.All of the current mega-banks were formed by a massive set of mergers in the late-1990's, and at that point the space at the top is pretty much filled.

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QuoteOriginally posted by: AbhiJIts quite clear that bulge bracket banks have been hit hard. But what about the second rung and third rung of US financial institutions. Are they in a better shape or in worse condition. bulge bracket banks are like the mcdonalds, walmarts, and UT Austins of the financial world -- they are gigantic mall establishments serving middle america. You do not think of mcdonalds as the "top rung" of the restaurant industry just because it's the biggest, do you? By the same token, why do you think the bulge bracket banks are the "top rung" of banking?! The top rung restaurants are the small 20-seat 5 star restaurants that you can't afford. The top rung of finance are the small but highly profitable hedge funds and private equity firms that only experts know about.

QuoteOriginally posted by: AbhiJIts quite clear that bulge bracket banks have been hit hard. But what about the second rung and third rung of US financial institutions.Are they in a better shape or in worse condition.you would be surprised, there are many banks who did not think that a 15% coupon paying equity piece of some shady CDO deal was worth keeping on the balance sheet. there many unimpaired smaller regional banks, in and outside the US, who are going to make shitloads of money on the steep yield curve.

But regional banks are like savings and loans banks. They do not dabble in investment banking and have no need for quants.