Goldman Sachs should be particularly helped by President-elect Donald Trump’s preference for deregulation, Bank of America suggested. Less oversight can boost investor confidence that Goldman will provide sustainable returns on equity, analyst Ebrahim Poonawala told clients on Wednesday. In fact, he said Goldman should be one of the clearest winners from this type of policy shift among large banks. “We expect Goldman Sachs to be among the biggest beneficiaries of a more balanced regulatory environment, especially a change in regulatory attitudes toward the capital markets business,” Poonawala wrote. “This should lead to improved flexibility on capital allocation and allow mgmt. to optimize capital usage as it works towards positioning the franchise to deliver a mid-teens through-the-cycle ROE.” To be sure, Poonawala did not refer to Trump, who takes office on Monday, by name in his note. But the Republican’s candidacy has long been tied to expectations for less regulation on businesses, which can explain in part why stocks rallied following his victory. Poonawala reiterated his buy rating on the bank stock in the note to clients. His $675 price target implies 11.4% upside over Wednesday’s close. The analyst’s comments come after Goldman on Wednesday reported better-than-expected earnings for the fourth quarter aided by strong trading results. Poonawala isn’t the only one thinking about the impact of potential regulatory changes and the banking world. Goldman Sachs CEO David Solomon said during the post-earnings call with analysts that chief executives have felt better since the election. “There has been a meaningful shift in CEO confidence, particularly following the results of the U.S. election,” Solomon said, according to a transcript from FactSet. “Additionally, there is a significant backlog from sponsors and an overall increased appetite for dealmaking supported by an improving regulatory backdrop,” he added. Goldman shares have added more than 6% in the new trading year, building on last year’s rally of more than 48%. — CNBC’s Jesse Pound contributed to this report.
