Wed Aug 4, 2010 3:06pm EDT
* Move could come as soon as this month - CNBC
* Part of effort to comply with Volcker rule - CNBC
* Shares up 1.89 percent
(Adds details, updates share price)
By Joe Rauch
CHARLOTTE, N.C., Aug 4 (Reuters) - Goldman Sachs Group Inc (GS.N) plans to spin off its proprietary trading business as early as this month to comply with the so-called Volcker rule, CNBC reported on Wednesday.
It would be the first move by the New York-based investment bank to adapt its business to comply with the U.S. financial reform package signed into law last month, and would follow similar moves from other banks.
One analyst said such a move would be a positive for the bank, and Goldman shares climbed 1.89 percent to $156.09 in early-afternoon trading.
"It gets them out of the way of the Volcker rule without causing any deterioration in their earnings. Therefore it's a significant positive," said Dick Bove, analyst at Rochdale Securities.
Goldman will receive a substantial number of benefits from the reform law, potentially offsetting the prop trading restrictions, he said.
A Goldman spokesman was not immediately available for comment.
In recent months, Goldman has been a focal point for critics of the financial sector's ills leading into the 2008 crisis.
On July 16, Goldman paid $550 million to settle U.S. Securities and Exchange Commission civil fraud charges over how it marketed a subprime mortgage product to institutional investors.
Under the Volcker rule, named for former Federal Reserve Chairman Paul Volcker, banks are restricted from proprietary trading and have new limits on the size of private equity or hedge fund investments. Proprietary trading has been a key source of Wall Street investment bank profits.
The rule was a key, and sometimes contentious, provision in the financial reform legislation, known as the Dodd-Frank Act.
Other major U.S. banks have already begun shedding other business and investments in the wake of the new capital rules imposed by Dodd-Frank.
Under the act, banks are only allowed to invest up to 3 percent of their Tier 1 capital in such assets, and many are shedding such stakes as a result.
On Aug. 2, CNBC reported Morgan Stanley (MS.N) plans to spin off its hedge fund unit FrontPoint Partners within the next three months.
On July 13, Citigroup Inc (C.N) announced it had agreed to sell its private equity unit to StepStone Group LLC and Lexington Partners for undisclosed terms. The deal would reduce Citigroup's total assets by $1.1 billion.
Bank of America Corp (BAC.N), the largest U.S. bank by assets, is shedding a $1.2 billion commitment to funds managed by Warburg Pincus LLC, and spun off a $1.9 billion portfolio of private equity investments to New York-based investment firm Sterling Stamos. (Reporting by Joe Rauch in Charlotte, N.C., additional reporting by Maria Aspan in New York; Editing by Tim Dobbyn, John Wallace, Phil Berlowitz) |
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