Goldman Sachs (GS)/Wells Fargo (WFC) Merger Rumors 'Totally Absurd' - Dick Bove

Odeon Capital bank analyst Dick Bove weighed in on recent rumors that Goldman Sachs (NYSE: GS) could merge with Wells Fargo (NYSE: WFC) or another large bank. The analyst said it is unlikely the investment bank would acquire or be acquired by a large bank "any time soon – if ever."

Bove first cited the lack of political goodwill. "Neither Republicans nor Democrats have embraced the idea of having the United States build another monster bank," Bove said.

In addition, the analyst said the Federal Reserve is unlikely to approve the merger of a big bank with an investment bank during a recession or what could be the biggest economic downturn in 90 years.

Third, Bove said Goldman would move up on the list of systemically important institutions. This would require more capital as a percent of assets. Goldman may have this capital on its own but the company it would acquire may not, he said.

The idea that Goldman could merge with Wells Fargo is "totally absurd," Bove said. "Wells is under a series of agreements with its regulators, one of which, I am sure, is that it cannot merge with anyone. Further, no bank is allowed to participate in a merger in which the newco winds up having more than 10% of the nation’s deposits."

The idea that Goldman would merge with an FDIC-Insured institution like U.S. Bancorp (NYSE: USB), may also frighten regulator, the analyst added. "Goldman is a high-risk investor," Bove commented. "U.S. Bancorp is a solid middle-America bank with a superb record of conservative operations. No one is going to want to throw that bank 'into the competitive fire on Wall Street.' U.S. Bancorp tried it once and did not like the business so it divested itself of Piper Jaffray."

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