What Will Goldman Sachs Do With $10 Billion? How About Buy a Bank

What will Goldman Sachs (GS) do with the nearly $10 billion that it plans to raise from a secondary offering and a preferred offering to Berkshire Hathaway (BRK.A)? Certainly GS will use some of the proceeds to bolster its capital. However, now that GS is organized as a bank holding company it will seek to attract deposits.

Unfortunately GS does not have a large retail brokerage business or a bank branch system which can drive bank deposits. Thus, I believe that GS will buy a bank. Not a real large bank but one of sufficient size to give GS a running start. I also think that GS will start in its own backyard in the New York region. Here are some potential candidates for GS in no particular order:

• New York Community Bancorp (NYB)  – market cap $5.8 billion;
• Hudson City Bancorp (HCBK) – market cap $9.65 billion;
• M & T Bank (MTB) – market cap $9.3 billion;
• Valley National Bancorp – market cap $2.9 billion.

I am sure that there are other potential banks. If I had to take a guess, given the price tags and distribution of the branch system, NYB would be my top choice.

Disclosure: At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC was long shares of GS --- although positions can change at any time.

Comments

[fineye:]

Why not WFC..?? a stock deal.. ?
I believe that could be one reason why Warren Buffett has agreed to put money in GS.

2008 Sep 25 04:22 AM