2 Reasons Why Dick Bove Downgraded Goldman Sachs To Sell

Vertical Group's Dick Bove, a notable bank analyst, downgraded Goldman Sachs Group Inc (NYSE: GS)'s stock from Hold to Sell amid a view the Wall Street bank is "troubled."

Bove has been an outspoken critic of Goldman Sachs' leadership and CEO Lloyd Blankfein for some time. The management team has been hesitant to change its core business model and are instead focusing on various business lines that are "no longer relevant" today. As a result, the company is "scrambling" to become "more of a lender than a trader" but at the same time management isn't making much information available.

However, the analyst shied away from turning bearish on Goldman Sachs' stock... until two recent events surfaced.

Options Market

The first is related to the company's withdrawal from several aspects of the options market, the analyst wrote in his note. While this move is consistent with the company's 2015 decision to longer serve as a market maker on the New York Stock Exchange, it serves as a signal that its trading business is in a "secular not cyclical decline."

Venezuela

Second, Goldman Sachs' ongoing relationship with Venezuela remains in place despite prior "highly questionable" transactions with the country. Specifically, Goldman Sachs "raised money for a troubled Portuguese bank that was lending the funds to Venezuela who paid the money to a Chinese contractor who was in jail for corruption."

Bottom line, Goldman Sachs' is showing investors it has "bad judgment" and the only possible remedy is "outside blood to change its direction."

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