Goldman Sachs' return on equity has been a hot topic as of late. The ROE hovers in the low to mid-teens now, compared to about 20 percent a year ago and nearly 40 percent at the end of 2008, as the glory years were peaking.

The decline in the first quarter sparked a lot of discussion, as Goldman Sachs (NYSE: GS) had been sticking to its stated goal of keeping the figure above 20 percent. But the regulatory uncertainty seems to have changed the dynamic a bit.

One analyst has told clients that after a meeting with top executives, Goldman Sachs is no longer "endorsing" a specific ROE goal. "We do not believe that management backing off the prior 20 percent return on tangible equity target is a surprise to the market," Roger Freeman of Barclays Capital wrote to clients. "At the same time, management declined to provide a new target due to the widely variable inputs still outstanding."

The fact is that all investment banks have deleveraged a bit, and that has tied their hands in terms of goosing profits quickly. The real issue is how aggressive the banks will be in trying to get returns heading north. Big dividends and aggressive stock buybacks are likely not forthcoming. So that leaves the old fashioned way: organic profits growth.

In an uncertain trading environment, however, a lower ROE may be the new normal not just for Goldman Sachs but for other investment banks as well.

For more:
- here's a Financial News article

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