Financial services will remain in upheaval for the foreseeable future, and the heavy hitters in retail and investment banking are not likely to retain their current positions, a senior Canadian banker has predicted.
"The financial landscape of the future will be significantly different from what it is today, and I don't think that any of the names that dominate today will dominate in the future," said Michael Rulle, managing director and head of U.S. operations at CIBC Wood Gundy, the U.S. unit of Toronto-based Canadian Imperial Bank of Commerce.
Speaking at a gathering of financial writers recently, Mr. Rulle named Chase Manhattan Corp., J.P. Morgan & Co., Deutsche Bank AG, and Goldman, Sachs & Co. as big players in financial markets that are unlikely to retain their positions.
He suggested that nonbanks such as Microsoft Corp., General Electric Capital Corp., and AT&T Corp. could well usurp the role of banks as suppliers of credit and as financial market intermediaries.
"Revolutions are never started by the ruling monarchy," Mr. Rulle observed. "It's very difficult for those on top to change."
Leading institutions, he added, "will certainly have to rework their strategies to stay on top." Three critical requirements for success, according to Mr. Rulle, would be maintaining a strong capital base, hefty investments in "human capital," and a mastery of technology.
But James M. McCormick, president of First Manhattan Consulting Group, said Mr. Rulle's forecast was a bit premature. "Over the next five years, the likelihood of Microsoft being a major player that has a material share of retail banking profits is minimal," he said.
The reason, he noted, is that those customers that use electronic and other alternative banking services tend to be among the most cost-conscious and, hence, the least profitable for banks.
Mr. Rulle noted that financial markets have also been rocked by increasing globalization. Competition between commercial and investment banks and foreign banks and U.S. banks is intensifying, he said.
"Foreign banks are changing the competitive landscape in a significant way, and competition has become fierce across a broad range of sectors not only for customers and business but for human capital as well," Mr. Rulle said. "Deutsche Bank has hired hundreds of fixed income traders, while CIBC has hired hundreds of derivatives specialists and acquired the Argosy Group," he note.
