WHOPPING RM37 BILLION IN FINES FOR CONSORTING WITH NAJIB & CO? GOLDMAN FACES STAGGERING PENALTIES OVER 1MDB – REPORT

A “tough legal setup” for Goldman Sachs Group Inc. in the 1MDB case may result in fines of as much as $9 billion, Citi analysts Keith Horowitz and Eileen Shao wrote in a note.

The scandal, centering on the firm’s raising money for a Malaysian state investment fund, has been weighing on Goldman’s stock price for months, they said. Shares are probably “fairly valued” now, given the continued overhang.

Since November, Goldman’s “underperformance represents about $12 billion of lost market cap, which we attribute largely to 1MDB concerns.” While many investors may view Goldman shares trading at tangible book multiple as a buying opportunity, “we view it as appropriate,” Horowitz and Shao said.

Goldman’s shares are down about 13 percent since the end of October, more than rival Morgan Stanley’s 8 percent decline. The KBW Bank Index is up about 1 percent in the same span.

Citi estimates Goldman will receive penalties ranging from $1.5 billion to $9 billion, and assumes a base case of $4 billion to $5 billion, though business activities are unlikely to be suspended.

Onerous fines and restrictions may depend on perceptions about Goldman’s compliance structure, Horowitz and Shao said. “If regulators view this more as an isolated incident and believe Goldman has an effective compliance program, consistent with Goldman’s stated position, then the fine would be on the lower end of the range.” Citi’s more bearish scenarios “get to the culture of the firm.”

Investors may have “initially downplayed the severity of the scandal as they believed the issue would be isolated to the conspirators and have limited direct impact on Goldman itself.” That changed when news of a potential connectionto Lloyd Blankfein, alleging the then-CEO attended meetings with Jho Low, began to surface on November 8, they said.

Goldman fell 11 percent over the next two trading days “as the market started to price in the implications that knowledge of Goldman’s role in the 1MDB conspiracy may have been greater than originally thought.” Horowitz and Shao note Goldman has said Blankfein doesn’t recall any one-on-one meeting with Low, and the bank hasn’t “seen any record to suggest such a meeting occurred.”

Goldman’s shares are now trading not far from mid-November’s level. Citi rates Goldman shares neutral, with a price target of $210. – BLOOMBERG

Goldman faces as much as RM37b in US fines over 1MDB, says report

KUALA LUMPUR ― Goldman Sachs Group Inc could face fines of up to US$9 billion (RM37 billion) in the United States due to a “tough legal setup” in connection with the 1Malaysia Development Berhad (1MDB) scandal, Bloomberg reported.

Citing a note by Citi analysts Keith Horowitz and Eileen Shao, it said it was estimated that Goldman could receive penalties ranging from US$1.5 billion (RM6 billion) to US$9 billion, and assumed a base case of US$4 billion (RM16 billion) to US$5 billion (RM20 billion).

The analysts said that onerous fines and restrictions might depend on perceptions about Goldman’s compliance structure but business activities were unlikely to be suspended.

“If regulators view this more as an isolated incident and believe Goldman has an effective compliance program, consistent with Goldman’s stated position, then the fine would be on the lower end of the range,” the analysts said in the Bloomberg report yesterday.

Horowitz and Shao had also attributed Goldman’s lost market cap of about US$12 billion (RM49 billion) since November last year largely to 1MDB.

They said investors might have “initially downplayed the severity of the scandal as they believed the issue would be isolated to the conspirators and have limited direct impact on Goldman itself.”

However, the analysts said this changed after news broke on November 8 last year of an alleged meeting between Goldman former CEO Lloyd Blankfein and Low Taek Jho, the Malaysian fugitive also known as Jho Low.

The allegations caused Goldman stocks to tumble by 11 percent over the next two days of trading “as the market started to price in the implications that knowledge of Goldman’s role in the 1MDB conspiracy may have been greater than originally thought,” they said.

Goldman is being investigated by Malaysian authorities and the US Department of Justice for its role as underwriter and arranger of three bond sales that raised US$6.5 billion (RM26 billion) for 1MDB.

It has been reported that US$2.7 billion (RM11 billion) out of the sum raised had allegedly been stolen by Low and  two former Goldman bankers,Tim Leissner and Roger Ng, who are all now facing charges in Malaysia. – MALAY MAIL

BLOOMBERG / MALAY MAIL