A Case for a Goldman Sachs (GS) Split

Goldman Sachs (NYSE: GS) should break the company up into two smaller entities, according to recent data compiled by Reuters.

Looking at Goldman as a sum-of-parts, and it becomes more clear. It's Investment Banking division may be worth $22 billion based on a multiple of 4 times expected fiscal 2011 estimates of $5.5 billion (Goldman's first-half 2011 revs annualized).

For it's Asset Management division, alternative investment activities may be worth about $15 billion at 10 percent of Assets Under Management (AUM). The Private Equity unit is difficult to value given its lack of color under the Volcker rule.

Adding the parts together, along with a roughly $7 billion stake in Commercial Bank of China, and you get about a $56.9 billion market cap. Reuters notes that the Institutional Client Services unit, generator of 53% of 1H11 rev., would therefore "come for free."

Current tangible book value-per-share multiples are 0.89 times for Goldman, 0.61 times at Morgan Stanley (NYSE: MS), 1.09 times at J.P. Morgan (NYSE: JPM), and 0.59 times for Bank of America (NYSE: BAC).

Reuters concludes that "past justification for maintaining structure looks out of step in changing global regulatory framework."

Goldman is trading down about 1 percent in pre-open action Thursday.

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