NEW YORK Goldman Sachs Group Inc (GS.N) shares hit a two-year low on Tuesday as investors fretted about the bank's ability to earn money in a new regulatory environment.
Goldman's stock was down $2.11, or 1.6 percent, to $128.60 in afternoon trade and were on track to close at their lowest level since May 2009.
The latest price represented a discount to Goldman's most recently posted book value per common share of $129.40 as of March 31. Book value is the accounting value of the bank's assets minus its liabilities.
Like other large financial institutions, Goldman faces higher capital requirements and restrictions on the type of activities it can engage in. Goldman is also experiencing a decline in trading revenue and other client activity.
In the first quarter, Goldman reported an annualized return on equity of 12.2 percent, or 14.5 percent adjusted for a special charge. That compares with ROE of more than 30 percent before the financial crisis hit.
"Their earnings are not going to be what they used to be," said Mark Coffelt, president and chief investment officer of the mutual fund company Empiric Advisors.
Coffelt, who does not own Goldman shares, said that at 5 percent of his holdings, financial stocks now represent the lowest portion of his portfolio since founding Empiric Advisors 16 years ago. He is not considering investments any time soon.
Analysts say boosting returns will be difficult for Goldman, at least in the near term.
"Regulatory clarity is necessary to jumpstart the stock," Barclays Capital analyst Roger Freeman wrote in a recent note, lowering his second-quarter earnings estimate for the bank by 37 percent, to $2.10 per share. He rates Goldman shares "neutral."
Goldman is due to report second-quarter results on July 19. Analysts' average earnings estimate is $3.21 per share, according to Thomson Reuters I/B/E/S.
Of the 21 analysts covering the stock, 18 advise clients to buy Goldman shares, two suggest selling the stock and six are neutral.
(Reporting by Lauren Tara LaCapra; editing by John Wallace)