Goldman Sachs finally got an upgrade on Tuesday after downgrades from more than half a dozen key analysts in recent weeks.
JPMorgan analysts Kian Abouhossein and Delphine Lee boosted Goldman to "overweight" from "neutral," citing its strong Tier 1 capital levels and noting its "best in class" of market risk-weighted-assets, following the proposed new Basel rules.
Goldman shares were up 1.6 percent to $133.21 in morning trading.
The Wall Street firm led the banking industry's recovery from the financial crisis in 2009, reporting a record annual profit. But analysts have grown concerned of late that financial markets have deteriorated since the robust first quarter.
In a research note last month, Barclays analyst Roger Freeman warned that sharply wider credit spreads, declines in structured finance indexes, sharply higher volatility and a "flight-to-safety" trade in less-risky assets could weigh on second-quarter earnings.
But the JPMorgan note on Tuesday said U.S. investment banks like Goldman and Morgan Stanley are more conservative in terms of market risk-weighted-asset recognition than their European peers, particularly Credit Suisse, UBS AG and Deutsche Bank AG.
The Basel rules are expected to require banks around the world to hold more capital to protect against future financial crises.
Goldman is expected to report its second-quarter results on July 20. Analysts on average expect earnings per share of $2.40, according to Thomson Reuters I/B/E/S.
Goldman's earnings could be as much 8.5 percent below that figure, according to Thomson Reuters StarMine's SmartEstimate, which gives more weight to recent forecasts by top-rated analysts.
Goldman has had a turbulent quarter. On April 16 the U.S. Securities and Exchange Commission filed civil fraud charges against the bank related to its marketing and packaging of a collateralized debt obligation.
Goldman has said it will fight the allegations. Its shares have fallen more than 25 percent since the charges were filed.
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