Financial supermarkets sure are out of favor these days. In the wake of an
report that both Citigroup and Merrill are considering issuing shares in
their brokerage arms, the NYT today says that H&R
Block could be broken up, with its Option One mortgage unit topping the
"for sale" list.
None of these things makes a huge amount of sense to me. Smith Barney, at this
point, is a brand name, not a business. Floating a minority stake in Merrill’s
brokerage arm could result in one of those situations like Palm and 3Com, where
the subsidiary was worth more than the parent. And the idea of trying to sell
a mortgage lender in the present climate is just crazy.
But financial stocks are weak right now, and at times like these the financial
engineers start crawling out of the woodwork claiming to be able to "unlock
value" or somesuch. The main thing they normally achieve, of course, is
simply the generation of enormous fee income for themselves.