Goldman Sachs could benefit from buying E*Trade: CLSA

Thomson ReutersThe Goldman Sachs logo is pictured on their post as traders work on the floor of the New York Stock Exchange in New York

(Reuters) – Goldman Sachs Group Inc could benefit if it expanded its traditional banking by acquiring online brokerage E*Trade Financial Corp given the Wall Street bank’s revenue has been largely flat this decade, said CLSA analyst Mike Mayo.

Goldman would gain from increased deposits, freeing up of excess capital that is otherwise trapped and vitality to revenue growth, the veteran banking analyst wrote in a client note.

The bank, which carries out consumer, corporate and private banking through GS Bank USA, has initiated the expansion of traditional banking with the acquisition of an online banking platform from General Electric Co last month.

Mayo — who has an “outperform” rating on Goldman — is rated four stars out of five for his recommendations on the stock, according to StarMine.

Of the 26 brokerages covering Goldman, 15 rate it “buy” or higher, 10 “hold” with one “sell”. Their median price target is $188.

Goldman’s shares were up 1.5 percent at $166.6 in afternoon trading. E*Trade’s shares gained 1.39 percent to $25.5, giving the company a market value of about $7 billion.

Up to Friday’s close, Goldman’s shares had lost about 7.6 percent of their value this year, while E* Trade had fallen about 14 percent.

(Reporting by Nikhil Subba in Bengaluru; Editing by Sriraj Kalluvila)

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