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[ 2010-06-21 ]

Goldman Sachs 'will be hit hardest' by regulation
London (UK) - 21 Jun 2010 – The Telegraph - Goldman, which
is currently under investigation by US market regulator the
Securities & Exchange Commission (SEC) for the alleged
mis-selling of a complex debt product to investors, could
see its earnings fall by nearly a quarter as a result of
rules being brought in by the US authorities.
Citigroup estimates Goldman's earnings per share could
decrease by 23pc, more than its main rivals such as Morgan
Stanley (-20pc), JP Morgan (-18pc) and Bank of America
Merrill Lynch (-16pc).
Referring to an "earnings overhang from regulatory reform",
Citigroup said it expected the introduction of laws such as
the Volcker Rule, named after former Federal Reserve
chairman Paul Volcker, to lead to an average 11pc reduction
in earnings across the finance industry.
The rule, which will ban banks from engaging in proprietary
trading, will hit investment banks such as Goldman hardest,
as it and others had made the most money in the past from
such activities.
New rules on over-the-counter derivatives are also forecast
to lead to a drop in earnings as banks will be increasingly
restricted on the types of activities they can do.
Since coming under investigation by the SEC, Goldman has
been engaged in a public relations war to defend itself
against accusations that some of its success had been based
on trading against its own clients (proprietary trading).
According to the Citigroup report, the subsequent fall in
the value of Goldman shares means that even with the threat
of increased regulation the bank could be an attractive
investment.
"We view the current price as an excellent entry point,"
wrote the analysts.


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