Pressurized by stringent regulations and forecasts of
lackluster demand in certain markets,
The Goldman Sachs Group, Inc.
) has decided to divest its uranium trading operations.
The decision follows major Wall Street bank
JPMorgan Chase & Co.
) proposed sale of its physical commodity business in October,
this year. Further,
) oil pipeline and terminals business - TransMontaigne - has
attracted the interest of Russia's largest oil company, OAO
Financial companies started foraying into the uranium business in
the mid-2000s when uranium prices were rising on expectations
that the demand for it would grow. In 2009, Goldman's uranium
business was established after the U.S. banking major purchased
the U.S. utility Constellation Energy's London-based trading
Of late, the commodity trading businesses of large financial
institutions are under scrutiny as the Federal Reserve is
reviewing its decision made in 2003 to allow banks to trade in
the physical commodity market. Banks have allegedly been misusing
the trading platform, thereby manipulating prices of the
Therefore, lawmakers are concerned about the risks associated
with the ownership of warehouses and plants by banks. They
believe that these ownerships tend to manipulate bank profits,
thereby affecting consumer interest.
However, we believe that finding a buyer for Goldman's physical
commodity business will be quite challenging. This is because
regulatory scrutiny and declining revenues have dampened interest
in commodity trading.
Goldman currently carries a Zacks Rank #3 (Hold). A better-ranked
stock in the financial sector includes
), which carries a Zacks Rank #2 (Buy).
GOLDMAN SACHS (GS): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
KEYCORP NEW (KEY): Free Stock Analysis Report
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