Goldman Seeks India Permit – Analyst Blog

According to the Economic Times, on March 23, Goldman Sachs Group Inc. (GS) has approached the Reserve Bank of India (RBI), India’s central bank, to seek a banking license to commence commercial banking operations in the country. Currently, the license has only been applied for and any material decision is long awaited.

 

Goldman already has a license for operating as an asset management company (AMC) in India, which the company is soon expecting to initiate while also seeking the bank operation approval. The company is already carrying out its business in the investment banking, global investment research, operations and technology areas in India.

 

This is not the first time that Goldman has approached to RBI for a banking permit. The company along with its Swiss competitor Credit Suisse Group (CS) has been reportedly attempting to seek a banking license since September 2009. This will broaden their product and service offering from mere merchant banking to derivatives, deposit acceptance and foreign exchange services, also including those from its fixed income, currency and commodities divisions.

 

 

By setting up commercial banking and asset management operations in India, Goldman is looking forward to tapping its investment opportunities in the vast and rapidly developing Indian market. Like most of the financial service providers, Goldman is strengthening its business platform in India by penetrating the retail market where a swift growth is being witnessed in the middle-class section of the society. Besides, while western markets appear more fragile and saturated post the global crisis, the emerging Asian economies provide a vast scope for long term growth and expansion.

 

Goldman’s fourth quarter 2009 earnings of $8.20 per share were significantly ahead of the Zacks Consensus Estimate of $5.18, primarily driven by a strong performance in investment banking and increased inflows, which offset the weak performance in the trading operations.

 

We believe that Goldman has performed better than the market expectations and survived the financial crisis. The company benefited from its low exposure to toxic mortgage-backed securities and increased client activity. Although current litigation issues on consumer lending and higher bonus payments continue to bother Goldman, the company is poised to grow significantly with its well-diversified business model and a more conducive operating environment.