There will be a few extra grey hairs on the heads of America’s most powerful bankers when they file into the Hilton in midtown Manhattan today for Barclays Capital’s financial services conference. Their companies survived the tumultuous 12 months since Lehman Brothers filed for bankruptcy on September 15 last year, but not without fundamental changes.

In the frantic weeks after Lehman’s collapse, it became clear that business could not go on as usual. “It was like going to your green market and people weren’t selling vegetables any more,” Robert Gach, a managing director in Accenture’s global capital markets business, recalled.

“In the credit space, that business was gone completely. Banks that were borrowing money to trade on their own account — which had fuelled their growth for the five preceeding years – couldn’t do so.”

As some markets shut down, others opened. “Margins on plain vanilla business, such as buying and selling stock, increased more slowly as people came out of the market,” Mr Gach said. “So the big growth areas had dried up and more traditional areas of the market looked more attractive.”

One of the most keenly anticipated addresses of the two-day BarCap conference will be delivered by James Gorman, who becomes Morgan Stanley’s chief executive on January 1. On September 21 last year, Goldman Sachs and Morgan Stanley morphed from investment banks to bank holding companies. The change in legal status gave the banks better access to discounted funding from the Federal Reserve.

Goldman Sachs quickly made clear that it had no serious interest in commercial or retail banking. Instead, the bank took advantage of the “vanilla” growth identified by Mr Gach to report record second-quarter trading figures this year.

Morgan Stanley took a different tack, cutting back its trading activity and entering a joint venture with Citigroup that created the world’s biggest retail brokerage — although more recently John Mack, its outgoing chief executive, encouraged his bankers to take more risks and the bank stepped up hiring on its trading floor.

Shareholders are wary. “We believe one of the hold-ups for investors with respect to Morgan Stanley has been a lack of clarity around the strategic direction of the firm,” Roger Freeman, an analyst at BarCap, said. “While Mr Gorman [has said] that the strategic direction of the firm has been set, we believe he will have further opportunities to elucidate the strategy.”

Citigroup set out its strategy in January — to separate into Citicorp, containing the bank’s core retail, commercial and investment banking businesses, and Citi Holdings, containing non-core operations to be divested and a pool of high-risk assets. Delivering on this strategy quickly enough to satisfy regulators has been more difficult. Citi stock has made a 355 per cent recovery since closing as low as $1.02 in March, but the bank remains ominously quiet about its plan for repaying its $45 billion taxpayer bailout, indicating that any turnaround is going to be tortuous, with the Government remaining a significant shareholder for the foreseeable future.

While Citigroup pares back, JPMorgan Chase and Bank of America (BoA) have taken advantage of the turmoil to expand. On September 26 last year, JPMorgan added to its retail business by taking the remnants of Washington Mutual off the hands of the Federal Deposit Insurance Corporation. As Lehman collapsed, BoA bulked out its investment banking division with the rescue of Merrill Lynch.

“JPMorgan Chase has both grown its balance sheet and issued very few shares and they’re one of the few that have picked up market share in pretty much every area they do business,” Jason Goldberg, an analyst at BarCap, said. “Bank of America took a similar path to JPMorgan but found the road a bit more bumpy.”

The bumps hit by BoA included a battle with shareholders, the US Securities and Exchange Commission and the New York attorney-general over the terms of the Merrill acquisition. The bank has not yet repaid its $45 billion taxpayer bailout nor agreed how much it must pay the Government for a loss-sharing agreement put in place in January.

Mr Goldberg expects JPMorgan and BoA’s next challenges to come from rising bad debts as Americans continue to struggle to pay their mortgages and credit card bills.

All banks face greater oversight — Congress is working through President Obama’s overhaul of the regulatory system. They will have a tougher time in the courts, too, as investors demand greater accountability. And the banks must walk a difficult line at the end of the year, when they weigh up how large a bonus pool they can award without causing public outrage.

Mr Gach believes that the banks have further changes to come. “Last year was all about the crisis coming to a head,” he said. “The first half of this year was about reacting to the short-term market realities. But that’s not where the story ends. Frozen markets will unfreeze, margins will return to normal and each of the firms has to think about what they’re going to do to not repeat the mistakes of the past.”

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