New York - Shares of Goldman Sachs turned positive on Monday, having spent most of the trading session down slightly following Friday's plunge.
Goldman Sachs shares added $2.62, to close at $163.32 after trading as low as $155 earlier in the session. The modest gain comes after shares tumbled $23.57, to close at $160.70 on Friday.
The Securities and Exchange Commission filed civil charges on Friday against Goldman Sachs, claiming the New York investment bank misled investors about the risks surrounding securities backed by subprime mortgages that it managed.
Those types of securities have been blamed for helping push the country into recession and creating the credit crisis.
Britain's Prime Minister Gordon Brown called on regulators there to investigate the bank as well to determine if it misled investors in Great Britain. German regulators said they are looking into the case and will not rule out any option. The European Union is also keeping a close eye on the US investigation.
Fitch Ratings said the charges and ongoing investigations would not affect the bank's long-term credit default rating. Goldman Sachs currently carries an investment-grade "A+" rating from Fitch.
Despite the charges and more potential investigations, FBR Capital Markets analyst Steve Stelmach maintained an "Outperform" rating on the stock with a price target of $190. He did however, remove Goldman from the "FBR Top Picks" list because the charges could potentially alter banking regulations.
'A compelling buy'
Uncertainty surrounding possible new financial regulation legislation could limit a rise in Goldman and other financial companies' stock prices, Stelmach said in a note to investors.
Goldman's shares, in particular, will face pressure because of headlines surrounding the charges and because the SEC case could alter the financial regulatory reform legislation currently being discussed by Congress.
Analysts say the timing of the Goldman Sachs charges could give Congress a chance to add more oversight to the banking sector.
Bernstein Research analyst Brad Hintz echoed Stelmach's comments, saying regulatory uncertainty could scare off some investors. However, the bank's long-term potential remains "attractive."
Rochdale Securities analyst Richard Bove also said the stock is still worth buying even though it is under a cloud of scrutiny. In a research note, Bove said that the charges will not keep other companies from working with Goldman.
The bank has long been considered one of the strongest on Wall Street.
If Goldman Sachs maintains those relationships, which would keep it solidly profitable, the recent dip in the stock price makes Goldman shares "a compelling buy," Bove wrote in the note.
The one major repercussion for Goldman could be that the bank might be forced to shake up its management. Bove said CEO Lloyd Blankfein or chief financial officer David Viniar might have to leave the company for public relations reasons.
Bove did not name any potential replacements, but said there are capable executives that could step in and continue to run the bank and produce big profits. A new CFO might have to come from outside the company, Bove added.
Goldman Sachs reports first-quarter results on Tuesday. Analysts polled by Thomson Reuters, on average, forecast the bank will report a quarterly profit of $4.01 per share.