Goldman shares surge on news of SEC settlement

People walk past revolving doors of the new Goldman Sachs Group Inc. global headquarters, also known by its address as 200 West Street, in New York's lower Manhattan, April 16, 2010.

NEW YORK (Reuters) - Goldman Sachs Group Inc (GS.N) shares opened 4.7 percent higher on Friday, the morning after the Wall Street firm agreed to pay $550 million to settle civil fraud charges.

The U.S. Securities and Exchange Commission agreed to settle charges against Goldman stemming from the bank's packaging and marketing of the Abacus 2007 collateralized debt obligation, a mortgage-linked security that turned toxic during the financial crisis.

Goldman shares opened at $152 on Friday, surging in light of the settlement, up from a Thursday close of $145.22.

"I would expect a pop through the morning and profit-taking in the afternoon," said Matt McCormick, a portfolio manager with Bahl & Gaynor. "You are going to get an emotional reaction and a relief rally based on the SEC settlement."

The SEC charges, filed April 16, had dogged Goldman shares for nearly three months, causing the firm's market value to fall by more than $25 billion at one point.

On Thursday afternoon, investors began betting the shares would rise amid speculation about a settlement. The shares closed up 3.7 percent.

The shares then rose more than 9 percent in after-market trading when the settlement was confirmed, helping Goldman recoup $6.6 billion in market capitalization in a single day.

NOT IN THE CLEAR

Even though investors were buoyed by the settlement, Goldman is still contending with other lawsuits and questions about whether its brand has been tainted.

Royal Bank of Scotland (RBS.L), for example, said it may seek to recover hundreds of millions of dollars from Goldman to add to the $100 million it received as part the SEC settlement. Royal Bank of Scotland got a piece of the $550 million settlement as an investor victim.

Legal experts also said Goldman's acknowledgment that its Abacus 2007 marketing materials were incomplete could expose it to additional lawsuits. Earlier this month, Goldman asked a judge to combine 18 shareholder lawsuits it faces.

Potentially even more harmful than the lawsuits is the damage to Goldman's brand.

Major clients have generally stuck with the bank, although some customers with large public profiles have recently been more cautious in working with the firm.

(Reporting by Steve Eder; editing by John Wallace)