Goldman Confident Reform Law Is Manageable, BofA Says (Update1)

July 29 (Bloomberg) -- Goldman Sachs Group Inc.’s management is confident that the financial-regulatory reform law signed by President Barack Obama is manageable and won’t cause a “significant” reduction in revenue, according to Bank of America Corp. analyst Guy Moszkowski.

The impact will be minimal unless market-making rules “turn out to be draconian (which they believe is unlikely),” Moszkowski wrote in a report sent to clients today, citing a meeting with Goldman Sachs President Gary Cohn and Chief Financial Officer David Viniar. The New York-based investment bank “is not waiting for final rules to be formulated by regulators to decide where to invest and how to grow.”

Goldman Sachs is maintaining a long-term target for 20 percent return on tangible equity, Moszkowski wrote. Some analysts have said the legislation may crimp earnings at the nation’s biggest banks. The law boosts oversight of derivatives trading and puts limits on proprietary trading and banks’ investments in private equity and hedge funds.

Goldman Sachs jumped $5.38, or 3.7 percent, to $152.58 at 4 p.m. in New York Stock Exchange trading. The shares are down 9.6 percent this year after doubling in 2009. Moszkowski rates the shares “buy” and has a price estimate of $182.

The firm may have to exit its Goldman Sachs Principal Strategies business because of limits on proprietary trading and will likely have to reduce its private-equity holdings, Moszkowski wrote. The firm has no plans to go private or give up its bank charter, he said in the note.

The new law may provide an opportunity for new business through derivatives clearing, Moszkowski wrote. Goldman Sachs said earlier this week that it started a unit to help clients manage over-the-counter derivatives clearing.

To contact the reporters on this story: Michael J. Moore in New York at mmoore55@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net.