UPDATE: JPMorgan Lowers Goldman (GS) to Neutral; NPR2 Will Curb Buybacks, Dividend
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Price: $158.90 +0.46%
Rating Summary:
7 Buy, 18 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 21 | Down: 43 | New: 13
Rating Summary:
7 Buy, 18 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 21 | Down: 43 | New: 13
Trade GS Now!
UPDATE - JPMorgan downgraded Goldman Sachs (NYSE: GS) from Overweight to Neutral, with a price target of $120.
The call comes from a review of the US Joint Agencies December 2011 Notice of Proposed Rulemaking (NPR2) concerns the capital charges which should be placed on market specific risk of debt exposures (for sovereigns, GSEs, PSEs, Banks, Financial Corporations and Non Financial Corporations) and securitization exposures.
According to JPMorgan, NPR2 will reduce Goldman Sachs's fully-loaded Basel III Tier 1 capital ratio from 9.7 percent down to 8.5 percent. On the cut, Goldman is likely to stop stock buybacks. During 2011, Goldman bought back about 47 million shares for $6.04 billion, with remaining authorization for buybacks of 63.5 million common.
Another overall negative factor is that U.S. investment banks could become less competitive in higher-rated securitizations. JPMorgan notes that the "proposal includes an intention to also apply the principles used for securitization and corporate debt exposure into the banking books."
JPMorgan notes that risk-weighted assets (RWAs) for Goldman Sachs will increase about $93 billion in 2012. The firm also commented: "Standardized Corporate debt positions could be significantly affected with risk weighting increasing by [greater than two-thirds], moving from a 60 percent to 100 percent weighting. We have not calculated impacts on Banks, Financial Institutions, and Sovereign exposure, although we note for FIs the impact could be significant if we were to assume a blanket 100 percent risk weight."
Finally, JPMorgan makes somewhat of a blanket statement in saying that in terms of business implications, "we believe higher capital charges have been already been anticipated by the banks for Basel 2.5 and for Basel 3, but not for these latest US Joint Agencies proposals."
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The call comes from a review of the US Joint Agencies December 2011 Notice of Proposed Rulemaking (NPR2) concerns the capital charges which should be placed on market specific risk of debt exposures (for sovereigns, GSEs, PSEs, Banks, Financial Corporations and Non Financial Corporations) and securitization exposures.
According to JPMorgan, NPR2 will reduce Goldman Sachs's fully-loaded Basel III Tier 1 capital ratio from 9.7 percent down to 8.5 percent. On the cut, Goldman is likely to stop stock buybacks. During 2011, Goldman bought back about 47 million shares for $6.04 billion, with remaining authorization for buybacks of 63.5 million common.
Another overall negative factor is that U.S. investment banks could become less competitive in higher-rated securitizations. JPMorgan notes that the "proposal includes an intention to also apply the principles used for securitization and corporate debt exposure into the banking books."
JPMorgan notes that risk-weighted assets (RWAs) for Goldman Sachs will increase about $93 billion in 2012. The firm also commented: "Standardized Corporate debt positions could be significantly affected with risk weighting increasing by [greater than two-thirds], moving from a 60 percent to 100 percent weighting. We have not calculated impacts on Banks, Financial Institutions, and Sovereign exposure, although we note for FIs the impact could be significant if we were to assume a blanket 100 percent risk weight."
Finally, JPMorgan makes somewhat of a blanket statement in saying that in terms of business implications, "we believe higher capital charges have been already been anticipated by the banks for Basel 2.5 and for Basel 3, but not for these latest US Joint Agencies proposals."
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