Who Should Banks Be Worried About?

The hedge funds might be treating banks as toys, but according to Dana Cimilluca today, it's the private-equity boys who the banks really need to be on the lookout for:

CapGen Capital Advisors, a new private-equity firm, plans to raise as much as $1 billion for bank and other financial company acquisitions...
CapGen, which was formed last year by former Bankers Trust vice chairman and U.S. Comptroller of the Currency Eugene Ludwig, is not alone in testing the banking waters. Others including Vulcan Capital, the investment firm of Paul Allen, the billionaire of Microsoft fame, recently formed a joint venture with Bankers’ Capital Group to buy regional banks in the Southeast.

Gene Ludwig is a very smart guy and a bankers' banker to his toenails: he wouldn't shake up the industry much. And I reckon that Bankers' Capital Group are hardly revolutionaries, either. The real threat to the banking industry comes not from private equity but from retail. If the likes of Wal-Mart ever get a banking license in this country, then – and only then – might there be the kind of banking revolution this country needs.

More on the subject of Wal-Mart banking tomorrow...