Goldman Sachs spends $690,000 to lobby government

NEW YORK

Goldman Sachs Group Inc. spent $690,000 during the fourth quarter to lobby the federal government on issues related to regulating the banking industry.

The $690,000 spent compares with $530,000 the New York-based bank spent during the same quarter a year earlier when the credit crisis was peaking. Goldman spent $840,000 to lobby the government during the third quarter.

Goldman Sachs has been heavily scrutinized by politicians and regulators because it quickly returned to profitability after receiving $10 billion in government bailout money in late 2008. It also has sparked public angst about big bonuses it pays to its employees.

The bank did repay the $10 billion it received as part of the Troubled Asset Relief Program last summer.

In the final three months of 2009, Goldman spent money to lobby Congress, the Commodity Futures Trading Commission and Export-Import Bank of the United States. Those efforts are focused on regulatory reform, derivatives trading, financial risk management, executive compensation, accounting rules, international taxes, small-business lending and export-import bank financing. link

TARP REPAYMENT

The remaining large cap banks with TARP funds will need
to raise capital equivalent to 50% of TARP outstanding,
according to our updated analysis, higher than our previous
assumption of 20% of TARP outstanding. We had been estimating
a lower share issuance based on our view that these
superregionals had stronger capital levels relative to their risk
assets and earnings volatility vs. larger peers. The new 50%
estimate is more simply based on the amount of capital that the
rest of the large cap banks have raised in conjunction with

TARP repayment. On average, including green shoes and
other capital actions (e.g. expected asset sales or common
issuances for employee stock plans), large cap banks have
raised common equity equivalent to a median of 50% of TARP
outstanding. We realize that the TARP repayment process is a
bank-by-bank discussion with regulators and Treasury. However,
given PNC’s example where it raised capital driving 4Q09
pro forma common Tier 1 ratio to 8%, or 11% adding National
City’s PAA, we believe it is more likely that repayment ratios for
Fifth Third, KeyCorp, Regions and SunTrust will come in closer
to the 50% average exhibited by the TARP repayers in our
coverage group. While we do not know what the ultimate
make-up of the capital raises will be, we believe the total issuance
by the remaining banks will be relatively close to what
was raised by the large cap bank peer group.

We currently project that the banks will repay TARP at the end
of 2Q10. In response to the timing of TARP redemption, the
banks have stated:

• Fifth Third – Given current expectations, management
would expect to repay TARP in 2010, later in the year. While
profitability and improving nonperforming assets are important,
there are no bright-line tests for redemption, and the bank will
repay the funds when they are comfortable with the economy
and their financial position.

• – Management is looking for clear signs of economic
improvement/stability; the company will repay as soon
as it is possible and practical. Regulators have not pressured
the bank to repay.

• Regions – No guidance provided on timing. Management
will repay TARP when it becomes financially prudent, looking at
factors such as profitability, improving credit, and more tangible
evidence of sustained economic improvement.

Adding Bank of America (BAC) to the U.S. Focus List

Investment Thesis: The IPC believes the risk/reward proposition on BAC’s stock is very attractive at current levels as we think BAC has many under-appreciated earnings levers and looks extremely cheap at 6x our estimated normalized earnings. We believe 2010 will be an important inflection point in terms of EPS and book value growth. Much of this growth will be driven by improving credit quality in 2010. This process has already begun as growth in non-accruals has improved for three quarters. We also see the recent TARP repayment as removing a significant FULL REPORT HERE
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