Goldman Sachs aims to invest in more small banks

May 26, 2010 | By Jim Kim

Like many other investors, Goldman Sachs (NYSE: GS), via a private equity (private equity news) unit, has its eyes on small banks, some in dire financial straights and some that are healthy.

Bloomberg reports that Goldman Sachs has applied to the Fed to acquire up to 25 percent of SKBHC Holdings, which aims to become a bank holding company. Oaktree Capital Management is also seeking a 25-percent stake. An Illinois teachers' pensions fund has also voted to invest $100 million.

The rules set forth by the FDIC governing purchases of small banks have struck some as a bit onerous, as they are designed to prevent flipping. Some groups are pushing ahead without seeking FDIC guarantees on loan losses. It's unclear how SKBHC will approach the market but it seems to really want distressed banks. Its status as a holding company would aid that.

To become a bank holding company, SKBHC is pursuing Starbuck Bancshares, the holding company of First National Bank of Starbuck, near St. Paul , Minn. The Starbuck bank is considered healthy. This points to more buying activity by a host of acquirers who sense gold in failed banks. Something of a gold rush is developing.

For more:
- here's the Bloomberg article