(Bloomberg) -- Goldman Sachs Group Inc.'s $3.9 billion deal with Malaysia to settle criminal and regulatory probes of its role in the 1MDB scandal lifts a major cloud hanging over the stock, even if the bank may be paying a premium to resolve the issue, analysts say.
The lender and the Department of Justice are also close to an agreement in the U.S. after tussling over a potential guilty plea. Last week, Goldman reported blow-out second-quarter earnings, while investors are keeping a close eye on the ramifications for financial regulation if Joe Biden defeats President Trump in November.
Goldman shares rose as much as 0.9% in early trading Friday. The bank is trailing the broader market but outperforming financial stocks so far this year, losing 12% compared with a 21% decline for the S&P 500 Financials Index and a 0.8% dip for the S&P 500.
Read more: Goldman's 1MDB Settlement Is Worth the Price: Gopalan & Moss
Here's a sample of the latest commentary:
Wells Fargo, Mike Mayo
Goldman may be “paying an extra ‘time premium' to get this matter resolved,” Mayo wrote in a note. On Thursday, he'd stressed the need for a deal as U.S. elections approach, but hadn't expected it would be this fast, he said. Even with a premium, the deal was “still worth it and would be below the worst investor estimates of $10 billion.”
The bank still has to resolve payments with the Justice Department, which may take the total settlement to $4.5 billion, more than Mayo's prior estimate of $3 billion to $4 billion. Investors should know by around Aug. 10 or before, he said.
Read more: July 23, Mike Mayo Says Goldman Should Resolve 1MDB Before U.S. Election
JPMorgan, Kian Abouhossein
Abouhossein sees the $2.5 billion cash payment to Malaysia as part of the settlement being “broadly in line with expectations and positive for the stock as it removes a major litigation overhang.”
Resolving 1MDB “should improve sentiment on the stock and also allow management to spend more time on the core business.”
BofA, Michael Carrier
Carrier now sees settlement with the Justice Department “in the near term,” with a fine of about $2 billion. Also expects Goldman's dividend payment is safe, after strong earnings.
Wolfe Research, Steven Chubak
The deal with Malaysia is “positive as Goldman is closer to removing a key overhang for investors,” providing “added comfort that the total settlement amount should be manageable,” Chubak wrote.
Expected shares would rise as “the settlement amount is less than feared as the Malaysian government has stated publicly in the past that they would seek reparations of $7.5 billion” or more. He added that it's still unknown how the Malaysian deal may affect negotiations with the U.S., but “some relief” may be “extended to Goldman given DOJ guidance to avoid ‘piling on' in settlements under the Foreign Corrupt Practices Act.”
Evercore ISI, Glenn Schorr
“Unfortunately, Goldman will still have to settle with the DOJ to move on completely and if past major foreign corrupt practice cases are a good indicator (which we think they are), the DOJ settlement could wipe out most of the great second quarter they just put up,” Schorr wrote.
Goldman can probably “take this lump and move on quickly enough,” and investors should “think of it as one more quarter of buyback delay,” he added.
Bloomberg Intelligence, Elliott Stein and Alison Williams
“Goldman Sachs' $3.9 billion settlement with Malaysia over 1MDB, announced July 24, should pave the way for the bank to settle with U.S. authorities. A U.S. settlement may be about $2 billion, based on fees earned and news reports. A potential guilty plea would be manageable, in our view.”
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