All we need are Will Smith and some zombies.
Tattered "for rent" signs hang in the windows of the building that once housed Bear Stearns. All that's left of Lehman Brothers is a digital crawl that endlessly cycles news. American International Group (AIG, news, msgs)keeps itself alive by selling body parts. HSBC (HBC, news, msgs) has retreated to its ancestral island fortress, far away from the fields where it went down in defeat before the pitiless hordes of the mortgage-backed securities market. The ghosts of Wachovia and Washington Mutual flit through quarterly financial statements. Citigroup's (C, news, msgs) Citibank branches offer promises to cynical customers.
Everywhere you look, you can see the ruins of the old financial order.
But in those ruins, like the green grass sprouting among the fallen stones of Sicily's Agrigento temples, you can see signs of the new financial order. Old players have been reborn. New leaders have risen to assume the mantle of the fallen. New opportunities beckon the brave and unbloodied.
It's still early. The green shoots are just shoots. Early leaders may falter. But this is also the time to start staking out positions in the stocks that could -- if things break right for these companies -- be the leaders of the financial sector for the next cycle, whether it's for just a few years or a few decades.
Here's my thinking on what that new financial order will look like, divided into five parts.
The creatures that ate AIG
Before the financial crisis, the AIG subsidiary AIA Group ran one of the most exciting financial businesses in the world. After 90 years in the region, the company had built up a network of 250,000 agents in 13 Asian markets. The company had 20 million customers and $60 billion in assets, and was a life insurance powerhouse in a region projected by consulting firm McKinsey to generate 40% of all growth in global life insurance premiums in the next five years.AIG subsidiary American Life Insurance, or Alico, did business in 50 countries. Its biggest developed market was Japan, where, before the financial crisis, the company was the country's No. 4 insurer. (Alico had name recognition of 99.2% in Japan.) Alico's business in the fast-growing markets of the Middle East, Russia and Latin America balanced the subsidiary's presence in Japan's mature life insurance market.
After the crisis, these companies don't belong to AIG anymore. MetLife (MET, news, msgs) bought Alico, and Prudential PLC (PUK, news, msgs) of London bought AIA.
2. Ready to rumble in Asia
The sales of Alico and AIA haven't restored the status quo in Asian financial markets -- not by a long shot. The AIG brand took a big hit in Asian markets, because of the company's near run with bankruptcy, and it's going to take work by the new owners to rebrand that business.(Especially because the Alico portfolio contains some risky and illiquid assets that will need a lot of attention. There's $5.3 billion in commercial mortgage-backed securities and $1.3 billion in Greek bonds, for example. I think MetLife has the balance sheet to handle the strain, but it won't be easy.)
And it's not just AIG that saw its reputation tarnished. HSBC, Citigroup, ING (ING, news, msgs) and Australia's Macquarie Group (MCQEF, news, msgs), to name just a few, took hits to their reputations in the crisis, retreated from these Asian markets or both.
That has opened the door for financial companies that escaped the worst of the crisis and that already have a presence in the region, such as Canada's Manulife Group (MFC, news, msgs), Spain's Banco Santander (STD, news, msgs) and the United Kingdom's Standard Chartered (SCBFF, news, msgs) to pick up share in the world's fastest-growing markets for financial products.
Continued: Picking up the slack
