Goldman Sachs’s Prospects ‘More Optimistic,’ JMP’s Trone Says

Goldman Sachs Group Inc.’s prospects have improved as the risk of a European bank meltdown eases and the firm adapts to structural changes in the market, JMP Securities analyst David Trone said.

After a meeting yesterday with Goldman Sachs Chief Financial Officer David Viniar, Trone said he was “more optimistic about near-term prospects than we have been in sometime.” He said today in a note to clients that he sees “some upward bias” to his earnings estimates for New York-based Goldman Sachs, which last week posted a smaller decline in fourth-quarter profit than analysts predicted.

Earnings reports from the six largest U.S. banks showed the industry suffered a third straight quarterly drop in combined trading and investment-banking revenue, raising concern that the slowdown is more than just a temporary rut and may signal a lasting shift to smaller volumes, profits and pay.

Executives and analysts are focusing on whether stiffer regulations, capital rules and a weak economy may solidify a decline in revenue after the European debt crisis curbed trading volume and corporate dealmaking in last year’s second half. Credit Suisse Group AG, UBS AG and Royal Bank of Scotland Group Plc, which are all shrinking their investment banks, have announced plans to eliminate about 8,300 jobs since the start of November.

Trone said Goldman Sachs’s “adaptability” makes him “bullish” about the company’s long-term prospects and supports his view that the franchise “has a competitive and profitable future.” Goldman Sachs said revenue will rise when the markets rebound, boosting pay for investment bankers, according to Trone.

JMP has a “market outperform” rating on Goldman Sachs’s stock, which gained 20 percent this year through yesterday.

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