Increasingly varied international regulations may make it too expensive to offer investment banking services on a large scale across the world.
Instead, JP Morgan expects the so-called second tier banks to gain a competitive advantage, focused either in geographic regions or in more specific areas of finance.
“The viability of running a global Tier I investment banking business as part of a universal banking business is starting to be put in question,” said Kian Abouhossein.
“We continue to prefer Tier II IBs over Tier I. We see Tier I IBs as uninvestable at this point with a risk of spin-off from universal banks based on new regulatory proposals.”
Those costs mean institutions with big wealth management units are likely give better returns in the medium term.
It came after JP Morgan boss Jamie Dimon pledged to work hard to meet the flood of new rules in his annual letter to shareholders.