Morningstar | Worst Outcome for Goldman Sachs From 1MDB Would Be if Systemic Lax Compliance Is Uncovered
While potential fines and remuneration related to Goldman Sachs and the participation of its employees with 1Malaysia Development Berhad remain difficult to quantify, we don't believe any eventual payouts should significantly impair the company's value, and we're maintaining our $258 fair value estimate and high uncertainty rating for the narrow-moat firm. According to reports, Goldman Sachs generated approximately $600 million in fees on bond offerings in 2012 and 2013 related to 1MDB that Malaysia is seeking to have reimbursed. This amount isn't material in comparison with the $2.45 billion of net income that the company generated in the third quarter and its approximately $80 billion market capitalization.More worrisome is the investigation by the U.S. Department of Justice. In 2016, Goldman Sachs had a $5 billion settlement with the Justice Department and other parties related to its residential mortgage-backed securities activities between 2005 and 2007. A $5 billion settlement can wipe out more than two quarters of earnings and dent the stock price, but it is still manageable compared with the company's market capitalization and around $75 billion of shareholders' equity. We believe the worst outcome for the company is if government investigations uncover widespread gaps in the company's compliance system. If that happens, this could be the first of many future fines, as has recently been occurring with Wells Fargo. The specter of a Wells Fargo-like scenario could prove to be an overhang on the stock.
Goldman Sachs Group is a bank holding company and financial holding company. The company is a global investment banking, securities and investment management firm that provides a range of financial services to corporations, financial institutions, governments and individuals. The company operates in four business segments: Investment Banking, which serves public and private sector clients and provides financial advisory services; Global Markets, which serves its clients who come to the company to buy and sell financial products, raise funding and manage risk; Asset Management, which provides investment services; and Consumer & Wealth Management, which provides a range of wealth advisory and banking services.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.