September 9, 2009 / 1:09 PM / in 10 years

UPDATE 1-JMP Securities ups Goldman Sachs to market outperform

Sept 9 (Reuters) - JMP Securities upgraded Goldman Sachs Group Inc (GS.N) to “market outperform” from “market perform,” and said it expects the company’s fixed income segment to benefit from less competition.

The competitive landscape has changed dramatically with the elimination of Lehman Brothers and Bear Stearns, as well as massive downsizing in fixed income at UBS UBSN.VX and Citigroup Inc (C.N), analyst Michael Hecht said in a note to clients.

“We believe it will now take more time than we previously expected for key competitors to re-risk and rebuild their fixed income businesses than previously anticipated,” Hecht said.

With an improved macroeconomic outlook, the analyst said Goldman should see significant growth in its equity sales and trading, prime brokerage, asset management, principal investing, underwriting, and mergers and acquisition segments.

Goldman currently has excess liquidity of $171 billion on which the company is earning very low interest rates, Hecht said.

“With this much dry powder, once Goldman resumes its buyback (which we expect by early 2010 at the latest), this could prove to be a significant return on tangible equity enhancer,” he said.

In the second half of 2009, the analyst sees Goldman earning $10.60 per share, up from his prior view of $8.14.

Shares of the company were up 73 cents at $167.95 in trading before the bell on Wednesday. They closed at $167.22 on Tuesday on the New York Stock Exchange.

For related alerts, please double-click [ID:nWNAB7716] (Reporting by Brenton Cordeiro in Bangalore; Editing by Anne Pallivathuckal)

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