Dreams of Goldman Doing Big Takeover Meet Stress Test’s Reality
By Sonali Basak, Sridhar Natarajan, and Yalman Onaran
Almost 10 years after the financial crisis, Wall Street was starting to wonder aloud: Might Goldman Sachs Group Inc. or Morgan Stanley make a big acquisition? At Goldman, the question arose on a conference call in April, as analysts examined the firm’s ambitious plan to expand banking services for consumers. Chief Financial Officer Marty Chavez was measured: Usually the company leans toward smaller “bolt-on” acquisitions, he said, but it’s also “open-minded.”   For one, the investment banks’ relatively low valuations aren’t helpful, KBW analyst Brian Kleinhanzl said. Their price-to-book ratios are hovering below that of regional banks, and significantly less than that of asset managers, making an acquisition in either space that much harder.  There’s also little political appetite to let global banks grow even further, said Karen Petrou, co-founder of Federal Financial Analytics, a research and advisory firm in Washington. And depending on the deal, it could become all the harder for them to clear future tests.  “A bigger bank would have a harder time passing,” Petrou said in an interview. “Goldman and Morgan Stanley scraped by this time, but with a bigger balance sheet boosted by deposits, from a bank they buy let’s say, the test would punish them even harsher.”