Bank of America suggested that Goldman Sachs should be particularly helped by President-elect Donald Trump’s deregulatory bent. Analyst Ebrahim Poonawalla told clients on Wednesday that less scrutiny could give investors more confidence that Goldman can achieve sustainable returns on equity. In fact, he said Goldman should be the clearest winner of this kind of policy shift among big banks. “We expect Goldman Sachs to be the biggest beneficiary of a more balanced regulatory environment, particularly a change in regulatory attitudes toward capital markets businesses,” Poonawalla wrote. “This should provide greater flexibility in capital allocation and allow management to optimize capital use to position the franchise to achieve mid-teens ROE over the cycle.” Indeed, Poonawalla did not mention Trump, who will be sworn in on Monday, by name in his memo. But Republican candidacies have long been tied to hopes for less regulation of businesses, which could partly explain why stock prices rose after his victory. In a note to clients, Poonawalla reiterated his buy rating on the bank’s stock. His $675 price target implies an 11.4% upside from Wednesday’s closing price. The analysts’ comments came after Goldman announced Wednesday that its fourth-quarter profit beat expectations on the back of strong trading results. Poonawalla is not alone in thinking about potential regulatory changes and their impact on the banking world. Goldman Sachs CEO David Solomon said on a post-earnings conference call with analysts that CEOs have felt better since the presidential election. “There has been a significant shift in CEO confidence, particularly in response to the results of the U.S. presidential election,” Solomon said, according to a FactSet transcript. “Furthermore, there is a significant backlog of orders from sponsors and overall appetite for closing deals is increasing, supported by an improved regulatory backdrop,” he added. Goldman shares are up more than 6% in the new trading year, building on a more than 48% rise last year. —CNBC’s Jesse Pound contributed to this report.
