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Goldman research analysts called for JPMC to be broken up into 4 parts earlier this year based on their lacklustre ROE. They are not alone as ROE at "universal banks" that combine retail and investment banking (e.g: Citi, BAML, Barclays) has dropped to an average of just 5%.
Specialists, on the other hand (e.g. Wells Fargo and Goldman) have ROE that is closer to 12%
And universal banks have been, to put it politely, a disappointment. JPMorgan produced a return on equity of 9.4 per cent last year. That is barely adequate but it is the best of a bad bunch. None of the others made it past 5 per cent. And last year was not out of the ordinary. Those five universal banks together have managed an average return on equity of 5 per cent over the past five years. There is always an excuse — fines, new rules, restructuring charges, tough conditions in one market or another — but these are all part and parcel of universal banking. Compare that with the specialists. Look at Wells Fargo, which is predominantly in the retail sector, with a 12 per cent five-year average ROE. Or even Goldman, a pure investment bank, with 11 per cent.
