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Citi has downgraded shares of Goldman Sachs to neutral from buy, expressing concerns that the investment bank may struggle to achieve its long-term goals. While Goldman management has outlined a 15% to 17% target for return on tangible common equity (ROTCE), Citi analyst Keith Horowitz believes this goal may be challenging for the bank at this time. Horowitz suggests that it will take time for Goldman to reach this target, and that a better investment banking environment will be necessary. He also cautions that investor returns will likely be on the lower end of Goldman's forecasts. Despite this downgrade, Goldman shares are still up 4.5% for the year.
Considering the recent downgrade of Goldman Sachs shares by Citi, it is clear that the investment bank is facing potential challenges in achieving its long-term goals. This could have implications for new businesses looking to enter the investment banking arena or seek financial services from Goldman.
The Impact on New Businesses:
For a new business entering the market, partnering with a reputable investment bank like Goldman Sachs is an enticing prospect. However, the concerns raised by Citi's downgrade highlight some cautionary factors that new businesses should consider:
1. Long-term Growth:
Goldman's struggle to achieve its long-term goals may impact its ability to support new businesses in their growth trajectory. A stagnant or underperforming investment bank may not be able to provide the necessary resources and guidance to help new businesses succeed.
2. Investor Returns:
Citi's caution about investor returns being on the lower end of Goldman's forecasts suggests that new businesses relying on Goldman for funding or investment support may face potential limitations in maximizing returns. This could impact the overall financial well-being and growth of these businesses.
3. Market Perception:
The downgrade itself could also affect market perception of Goldman Sachs. This could result in diminished confidence among potential clients, making it harder for new businesses to secure necessary financing or attract investors.
In conclusion, while Goldman Sachs continues to hold a strong market position, the concerns raised by Citi's downgrade should serve as a valuable reminder for new businesses to carefully evaluate the potential impact on their growth plans and financial prospects when considering partnerships with investment banks. Vigilance in monitoring market conditions and considering alternative options will be crucial for ensuring long-term success in a potentially challenging investment banking environment.
Article First Published at: https://www.cnbc.com/2023/07/25/citi-downgrades-goldman-sachs-says-targets-will-take-time-to-be-reached.html