Earnings at Goldman Sachs Group Inc. and Morgan Stanley could drop by a 10th under President Obama's "Volcker Plan," but selling affected businesses would also hand the companies tens of billions in new capital, analysts said Tuesday.
The estimate by Keefe, Bruyette & Woods analysts Robert Lee and Aaron D. Teitelbaum was the first to put a potential sale price on any proprietary trading, principal investing and asset management businesses that could be affected by the plan. The values, which the analysts stress are "educated guesses," are $21.7 billion for Goldman and $12.4 billion for Morgan Stanley.
Selling the affected businesses would lower Goldman's earnings by anywhere from 9.9% to 12.4% this year and by 8.9% to 11.2% next year, according to the estimate. For Morgan Stanley the numbers would be 11.9% to 15% this year and 10.8% to 13.6% in 2011.