Goldman Sachs’ (NYSE:GS) CEO David Solomon said he sees good prospects for underwriting this year, while downplaying concern that growth in the leveraged-loan market is a risk for big banks, saying the US economy is ‘just fine’.
“If the market environment continues to be what we see today, I think we’ll have a relatively robust underwriting calendar for 2019,” Mr. Solomon said in an interview Thursday from Davos, Switzerland.
While the government shutdown has delayed some IPOs (initial public offerings), the backlog is still healthy, he said.
Volatility weighed on capital markets during Q-4, when revenue from Goldman’s underwriting business dove 38% to $843-M. The firm blamed lower leveraged-finance activity and a drop in secondary equity offerings.
Banks were left with billions of risky corporate loans they struggled to sell last month.
Policy makers including former Fed Chairwoman Yellen and ex-Fed governor Daniel Tarullo have raised concerns about the buildup in leveraged debt creating risks that could harm the economy.
“I’m not really looking at the big bank balance sheets and thinking about leveraged loans as a risk issue,” Mr. Solomon said.
On the economic outlook, Mr. Solomon said:
- “There’s a possibility that as we get into the latter part of 2020 and we see continuing tightening, as the Fed continues to manage monetary policy, that we could see an economic slowdown.”
- “Our economists are talking about 3.5% global growth. We are talking about 2.25% to 2.4% growth in the US. If you look at just the economy itself, I think we are doing just fine.”
Goldman Sachs (NYSE:GS) was under heavy pressure in much of December and in January due to scandals overseas and due to a larger perceived drag on its trading operations as the markets were beaten down in December. Goldie’s shares went under 155 during the December lows and kept marking 52-week lows, but its stock was trading at closer to 178 prior to its earnings release. The stock closed out this last week at 202.54 after rising almost 20 on the actual earnings report this week. Its shares have rallied more than 30% off the December lows, but Goldman Sachs reported that its Y 2018 book value was up over 14% from a year earlier at 207.36/ share. Its tangible book value per common share rose by over 15% in the year to 196.64/share. Goldman Sachs shares were up 14% over the prior week and its stock price was last seen up nearly 27% YTD, and it has a 52-wk trading range of 151.70 – 275.31. The current consensus analyst target price was last seen at 225.77. For a point of reference, the consensus price targets have come down during its more recent troubles as that target price was 253.30 at the start of Y 2019 and almost 275 just at the start of November.
I see 275+ as a Y 2019 target for Goldie, as all of my Key technical indicators have turned Very Bullish in here.
Have a terrific weekend
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