U.S. private equity giant
The Blackstone Group L.P.
), along with Singapore-based sovereign wealth fund, The
Government of Singapore Investment Corporation Private Limited
(GIC) is set to take over a large stake of
The Goldman Sachs Group, Inc.
) Rothesay Life Ltd. London-based Rothesay Life Ltd., is the
European insurance unit of Goldman.
GIC as well as Blackstone is set to buy 30% stake each in
Rothesay. Additionally, U.S. life assurer, Massachusetts Mutual,
is set to acquire 6% stake. This will leave Goldman with roughly
one-third holdings in the total business.
Under pressure from new regulatory requirements, Goldman had
intended to shed most of its stake in Rothesay over the span of
one year in deals worth roughly $1.40 billion. Under Basel rules,
banks are required to maintain a capital cushion to absorb
possible losses on assets. The Basel III regulations have made
pension businesses less attractive for banks, and have forced
banks such as Goldman to vend their businesses to
lesser-regulated private equity firms like Blackstone.
Goldman's Tier 1 common equity as of Jun 30, 2013, was 9.3% of
the bank's risk-weighted assets under Basel III rules. However,
the N.Y.-based banking giant has set a goal of about 9.5% or 100
basis points higher than the regulatory limit.
It appears that Goldman has been selling its stake in businesses
to reduce its non-core business exposure. Regulatory pressure to
strengthen its capital ratios is another factor that caused the
company to take such measures.
Weak capital levels and the requirement to conform to more
stringent capital rules are challenges in the present unstable
economy. However, the new capital rules will benefit the
financial system in the long run. They will prevent bank failures
and involve less of taxpayers' money for the bailout of troubled
Blackstone as well as Goldman currently carry a Zacks Rank #2
(Buy). Better performing financial stocks include
GAIN Capital Holdings, Inc.
TD Ameritrade Holding Corporation
), both of which have a Zacks Rank #1 (Strong Buy).
TD AMERITRADE (AMTD): Free Stock Analysis
BLACKSTONE GRP (BX): Free Stock Analysis
GAIN CAP HLDGS (GCAP): Free Stock Analysis
GOLDMAN SACHS (GS): Free Stock Analysis
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