Goldman Sachs Recommends ‘Plan B’ For Struggling Big Banks

It’s no secret that a lot of banks have seen a lot of red recently. A new report from Goldman Sachs (NYSE:GS) suggests that ‘Plan B’ action is needed by most big banks in order to turn around returns.

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The three main issues in the report are:

1) Traditional banking profitability has declined while expenses have not.

2) Legacy assets and exposures are still lagging.

3) The playing field is leveling, as leveraging up is no longer an option.

The Goldman report sees some big potential upsides from Plan B actions. For Citigroup (NYSE:C), up to 65 percent if the company transfers real estate assets to existing shareholders and writes off the DTA. For Morgan Stanley (NYSE:MS), up to 63 percent by reducing fixed income trading and opening up capital and buy back shares. For Bank of America (NYSE:BAC), an upside of 35 percent for mirroring JPMorgan (NYSE:JPM) and saving costs by winding down legacy asset servicing.

The report also recommends Plan B action for Regions Financial (NYSE:RF), Zions Bancorp (NASDAQ:ZION), and KeyCorp (NYSE:KEY), adding Regions to its Conviction Buy List, while removing Wells Fargo (NYSE:WF).

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