Goldman Sachs’ trading is going to improve seasonally in the first half of the year, as capital markets continue to recover and as the trading markets get more clarity on regulatory and capital requirement changes, said Mark Lane, equity research analyst at William Blair & Co.
“We feel pretty confident that both equity underwriting—particularly the IPO business—as well as M&A, will improve in 2011,” Lane told CNBC.
“But the key wildcard is still trading,” he continued. “This is a heavily trading-driven firm and it was a difficult year for trading—investors in general are confused, given ambiguity in the environment."
"And with a more stable environment, people will be much more active, particularly in the first half.”
Goldman Sachs posted a 53 percent decline in quarterly profit Wednesday, reflecting the difficulty Wall Street had in generating trading revenue in a volatile interest-rate environment.
Lane has had an “outperform” rating on the banking giant for the last two years.
“This was an unusual year: Even though the stock market was up, there was tremendous volatility and significant dislocation in certain markets,” he explained. “We’re going to get significant clarity in a lot of the rulemaking associated with regulation as the year develops.”
Scorecard—What He Said:
- Lane's Previous Appearance on CNBC (Oct. 21, 2010)
More Market Analysis & Advice:
- Cramer: Investors Wrong About Citi’s Quarter
- 16-29% Upside in This Large Bank: Wells Fargo Analyst
- Banks to Make a 'Boxcar Full of Money' This Year: Pro
CNBC Data Pages:
Goldman Sachs' Rivals:
Bank of America
Lane has investment banking clients who own shares of GS.
William Blair & Co. receives or seeks to receive compensation for investment banking services from GS.