Many U.S. banks are trading below book value because of concerns over regulation, and share prices will rise as those rules are finalized, said Goldman Sachs Group Inc. Chief Executive Officer Lloyd C. Blankfein.
Bank stocks will climb toward book values as “regulation will not turn up as bad as it’s judged to be, the economic certainties will clear up and people will decide there’s growth,” Blankfein said today in a presentation in Santiago, Chile.
Goldman Sachs’s shares are selling about 5 percent above book value, the only one of the five largest Wall Street banks to trade above its accounting value of equity. The firm traded for as much as three times book value in 2007. Banks are facing new international capital rules along with U.S. regulations on derivatives and a ban on proprietary trading in the wake of the financial crisis.
“The natural response is to have more regulation,” Blankfein told reporters after the event. “It may well go too far, but if does, it will adjust.”
Blankfein cited the number of U.S. laws governing financial services that were passed in the decade following the crash of 1929 and the start of the Great Depression.
“You’re not going to get it right the first time,” he said. “There has to be very good dialogue between the firms like ourselves, that have a lot of knowledge, the legislators that have to make a decision and have to weigh risk versus reward and safety to the system, and the regulators that have to design and implement the regulations.”