Goldman Seen Repurchasing 11% of Shares by End of 2013

Goldman Sachs Group Inc., the fifth-biggest U.S. bank by assets, may buy back as much as 11 percent of current shares outstanding by the end of 2013, according to International Strategy & Investment Group Inc.

That target could be reached if the New York-based company speeds the reduction of risk-weighted assets and the Federal Reserve approves the repurchase program, Edward Najarian, an analyst at ISI, wrote in a research note today. Otherwise, ISI estimates Goldman Sachs will buy back 6 percent of fully diluted shares outstanding, or about 31 million shares, over the next six quarters.

The bank is unlikely to earn a sustainable return on tangible common equity above 10 percent between 2012 and 2014 and Goldman Sachs, therefore, is fairly valued at between 80 percent and 90 percent of tangible book value, according to the note. The shares are likely to remain in a range of $95 to $120, wrote Najarian, who has a hold rating on the stock.

“We don’t see tremendous upside from its current stock price and remain wary of the challenging macro backdrop as well as Goldman’s volatile earnings,” Najarian wrote.

Goldman Sachs climbed 1.2 percent to $103.24 in New York today and has advanced 14 percent this year. The shares trade at 83 percent of tangible book value, an estimate of how much the firm would fetch in a liquidation.

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