Break up Goldman Sachs.
That was the rally cry on Wall Street Wednesday, as Goldman shares rose 2%. The gains came amid talk that the firm could spin off part of its proprietary trading business to get around the Volcker rule.
CNBC reported the New York-based investment bank could make the move as soon as this month as it responds to financial reform legislation passed last month by Congress. The Volcker rule, which will eventually limit the amount of money a federally insured bank can invest in risky ventures like private equity or hedge funds, has prompted a number of big banks to consider similar moves.
The gains were only the latest for Goldman, whose shares have risen 11% in the three weeks since the firm announced a $550 million settlement of Securities and Exchange Commission fraud charges.
Analysts continue to push the stock, contending that even the uncertain regulatory and economic landscapes of the coming year favor Goldman, which is regarded as savvier and quicker to the punch than its peers.
“Given the firm’s culture of being nimble and strong technology, we see GS as among the best positioned to take share amid uncertainties created by new regulation,” Citigroup analyst Keith Horowitz wrote last week in a note to client. Citi rates the stock buy and expects it to rise 30% in the next year.
Still, Goldman holders have seen this movie before. Twice this year the stock has staged major rallies, only to plunge when confronted with bad news on the regulatory front.
In January, former Fed chief Paul Volcker upstaged the firm’s record profit by appearing with President Obama to announce his bank trading crackdown. And in April, of course, the SEC knocked the bottom out of the stock with charges Goldman had misled investors.
Chatter about a spinoff suggests Goldman managers are once again racing ahead of their rivals. Whether they can outrun all the watchdogs is another question.