The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.



) --

Goldman Sachs

(GS) - Get Report

has been forced to rethink its business model, as it has come under fire from regulators of late.

While the Dodd-Frank regulations have already reduced some of Goldman's trading operations due to the curb on proprietary trading, regulators want the bank to scale back its risky trading operations further by watering down its buying and selling on behalf of clients.

And it looks like Goldman's top bosses are putting their heads together to come up with a new model to ease this pressure from regulators while still trying to do what they do best -- generate profits. The bank seems intent on growing its asset management business, with the possibility that it could acquire another asset manager such as

Deutsche Bank


(DB) - Get Report

asset management arm. The German bank is rumored to be looking to sell its asset management business.

We currently have a

$126 price estimate for Goldman's stock, and attribute the near 35% premium to the overall pessimism among investors regarding economic conditions, and bank stocks in particular.

See the full Trefis analysis for Goldman Sachs


More than half of Goldman Sachs' quarterly revenues are usually attributable to its debt and equity trading businesses. While these businesses have contributed the most in past years to its income figures, they have gotten considerable flak recently -- especially after Goldman reported its second-ever quarterly loss in Q3 2011. Doubts were raised about Goldman's business model, which brings substantial risk to the bank's balance sheet -- something that regulators have come down hard upon since the 2008 global economic crisis.

Recognized as one of eight systemically important banks in the U.S., Goldman's business is under much more scrutiny now than it was a couple of months ago. Reportedly, it has been told to "restructure the business with less risk and accept lower returns."

The need for a less risky balance sheet appears to leave Goldman with just one palatable option given its existing structure. As there is limited room for expansion in its advisory and underwriting services business, and most of its other businesses involve risks similar to the trading business, an expansion of the asset management division seems to be Goldman's best bet.

Deutsche Bank's asset management business has more than $1.1 trillion in assets under management -- significantly more than the near-$830 billion for Goldman. Our analysis of Deutsche Bank estimates the value of its asset management business at more than $3 billion; but given current market conditions and Deutsche Bank's apparent desire to exit the business, the unit could probably be had for considerably less than that.



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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.