Financial firms face a “new world order” after a weekend fire sale of Bear Stearns and the Federal Reserve’s first emergency weekend meeting since 1979, research firm CreditSights said in a report on Monday.
More industry consolidation and acquisitions may follow after JPMorgan Chase & Co on Sunday said it was buying Bear Stearns for $236 million, or $2 a share, a deep discount from the $30 price on Friday and record share price of about $172 last year.
“Last evening the Bear Stearns situation reached a crescendo, as JPMorgan agreed to acquire the wounded broker for a token amount of $2 per share,” CreditSights said. “The reality check is that there are many challenged major banks, brokers, thrifts, finance/mortgage companies, and only a handful of bona fide strong U.S. banks.”
CreditSights said it lowered its broker, bank and finance company recommendations to “market weight” due to the credit crisis and stresses in the market.
In the event of future consolidation, potential acquirers identified by CreditSights include JPMorganChase, Wells Fargo, US Bancorp, Goldman Sachs and Bank of America ), once it works through its recent agreement to acquire Countrywide Financial Corp, the largest U.S. mortgage lender.
Possible foreign bank acquirers include HSBC, Barclays and Canadian firms, said CreditSights, which said the Bear Stearns deal should be good for bondholders.
“The debt side whether at the parent level or on the broker/dealer levels seems to be in rather good shape with the capital structure to be assumed by JPMorgan at deal close,” which is expected in about 90 days, CreditSights said.
Financial stocks are likely to trade lower but the overall market may begin to stabilize, according to Morgan Stanley’s chief U.S. credit analyst.