Goldman Sachs Group Inc. (GS), the fifth-biggest U.S. bank by assets, could rise to $239 a share were all its businesses to peak at once, said Brad Hintz, an analyst at Sanford C. Bernstein & Co.
Hintz is maintaining an outperform rating on shares of the New York-based bank, with a price target of $190, he said today in a report. His valuation for Goldman Sachs would reach the $239 peak in a “utopian scenario” where revenue from stock underwriting matched 2000, trading equaled 2007 and the firm cut the percentage of compensation it paid to bankers, he said.
Achieving this zenith “in the near term is unlikely and would require a nirvana-like environment,” Hintz wrote in the report.
Chief Executive Officer Lloyd Blankfein said last month at an investor conference that he’s been working to improve Goldman Sachs’s return on equity, a measure of how well it invests profits. The firm, which earned an ROE of about 10 percent so far this year, is unlikely to surpass 15 percent, given new regulations, according to Hintz.
Goldman Sachs has climbed 38 percent this year to $175.70 at 11:58 a.m. in New York. It’s too early to sell the stock because revenue for the investment-banking industry will probably increase next year, Hintz said.
Goldman Sachs, which before the financial crisis targeted a long-term ROE of 20 percent, has declined to set a goal since then, saying it wanted to see the effects of new rules. Recent international regulations have required banks to hold more equity capital, pushing down ROE.
Tiffany Galvin, a bank spokeswoman, declined to comment on Hintz’s report.
To contact the editor responsible for this story: Peter Eichenbaum at firstname.lastname@example.org