(Source: Business Wire)
The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of
$12.37billion and net earnings of $3.19billion for its third quarter
ended September25,2009. Diluted earnings per common share were $5.25
compared with $1.81 for the third quarter ended August29,2008 and
$4.93 for the second quarter ended June 26, 2009. Annualized return on
average common shareholders' equity (ROE)(1) was 21.4%
for the third quarter of 2009 and 19.2% for the first nine months of
2009.
Business Highlights
Goldman Sachs continued its leadership in worldwide mergers and
acquisitions, ranking first in worldwide announced transactions for
the calendar year-to-date.(2)
Fixed Income, Currency and Commodities (FICC) generated quarterly net
revenues of $5.99billion, reflecting strong results across most
businesses.
Equities generated quarterly net revenues of $2.78billion, reflecting
strong results across the franchise.
The firm's Tier 1 capital ratio under BaselI(3)
was 14.5% as of September25,2009, up from 13.8% as of June26,2009.
The firm's Tier 1 common ratio(3) under BaselI was
11.6% as of September25,2009, up from 10.9% as of June26,2009.
Book value per common share increased 4% during the quarter to $110.75
and tangible book value per common share(4) increased
5% during the quarter to $101.39.
On July22,2009, the firm repurchased the warrant issued to the U.S.
Treasury pursuant to the Treasury's TARP Capital Purchase Program for
$1.1billion. The U.S. taxpayers' annualized return on their total
investment in the firm was approximately 23%.
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"Although the world continues to face serious economic challenges, we
are seeing improving conditions and evidence of stabilization, even
growth, across a number of sectors," said Lloyd C. Blankfein, Chairman
and Chief Executive Officer. "Our client franchise businesses --
advisory, financing, market making and asset management -- contribute to
and benefit from the overall improvement in conditions. Because the job
market, and growth more generally, remain under stress, we continue to
be focused on actively helping our clients in order to promote greater
economic activity."
Net Revenues
Investment Banking
Net revenues in Investment Banking were $899million, 31% lower than the
third quarter of 2008 and 38% lower than the second quarter of 2009.
Net revenues in Financial Advisory were $325million, 47% lower than the
third quarter of 2008, primarily reflecting a significant decline in
industry-wide completed mergers and acquisitions. Net revenues in the
firm's Underwriting business were $574million, 15% lower than the third
quarter of 2008, due to significantly lower net revenues in debt
underwriting, partially offset by higher net revenues in equity
underwriting. The decrease in debt underwriting primarily reflected a
decline in net revenues from leveraged loans. The increase in equity
underwriting primarily reflected an increase in industry-wide initial
public offerings. The firm's investment banking transaction backlog
increased significantly during the quarter. (5)
Trading and Principal Investments
Net revenues in Trading and Principal Investments were $10.03billion,
significantly higher than the third quarter of 2008 and 7% lower than a
record second quarter of 2009.
Net revenues in FICC were $5.99billion, significantly higher than the
third quarter of 2008. These results reflected strong performances in
credit products and mortgages, which were significantly higher compared
with a difficult third quarter of 2008. Net revenues in interest rate
products were also strong and significantly higher compared with the
third quarter of 2008, while net revenues in commodities and currencies
were lower compared with the same prior year period. During the quarter,
FICC operated in an environment characterized by solid client activity
levels, tighter credit spreads and a general improvement in asset values.
Net revenues in Equities were $2.78billion, 78% higher than the third
quarter of 2008. These results reflected strong net revenues in
derivatives, which were significantly higher than the third quarter of
2008, as well as a solid performance in shares. In addition, net
revenues in principal strategies improved significantly compared with a
difficult third quarter of 2008. Commissions declined compared with the
third quarter of 2008. During the quarter, Equities operated in an
environment generally characterized by a significant increase in global
equity prices, favorable market opportunities and a decline in
volatility levels.
Principal Investments recorded net revenues of $1.26billion for the
third quarter of 2009. These results included a gain of $977million
from corporate principal investments, a gain of $344 million related to
the firm's investment in the ordinary shares of Industrial and
Commercial Bank of China Limited (ICBC) and a loss of $66 million from
real estate principal investments.
Asset Management and Securities
Services
Net revenues in Asset Management and Securities Services were
$1.45billion, 29% lower than the third quarter of 2008 and 6% lower
than the second quarter of 2009.
Asset Management net revenues were $974million, 14% lower than the
third quarter of 2008, primarily reflecting the impact of changes in the
composition of assets managed. During the third quarter of 2009, assets
under management increased $29billion to $848billion, due to
$39billion of market appreciation, primarily in equity and fixed income
assets, partially offset by $10 billion of net outflows. Net outflows
primarily reflected outflows in money market assets, partially offset by
inflows in fixed income assets.
Securities Services net revenues were $472million, 48% lower than the
third quarter of 2008. The decrease in net revenues primarily
reflectedthe impact of lower customer balances compared with the third
quarter of 2008.
Expenses
Operating expenses were $7.58billion, 49% higher than the third quarter
of 2008 and 13% lower than the second quarter of 2009.
Compensation and Benefits
Compensation and benefits expenses (including salaries, estimated
year-end discretionary compensation, amortization of equity awards and
other items such as payroll taxes, severance costs and benefits) were
$5.35 billion, which was higher than the third quarter of 2008, due to
higher net revenues. The ratio of compensation and benefits to net
revenues was 43.3% for the third quarter of 2009 (compared with 48.3%
for the second quarter of 2009), resulting in a ratio of compensation
and benefits to net revenues of 47.0% for the first nine months of 2009.
This ratio was 49.0% for the first six months of 2009 and 48.0% for the
first nine months of 2008.
Non-Compensation Expenses
Non-compensation expenses were $2.23billion, 2% higher than the third
quarter of 2008 and 7% higher than the second quarter of 2009. The
increase compared with the third quarter of 2008 reflected the impact of
a $200million charitable contribution to The Goldman Sachs Foundation
and $36million of net provisions for litigation and regulatory
proceedings during the third quarter of 2009, partially offset by the
impact of lower transaction volumes in Equities.
Provision for Taxes
The effective income tax rate for the first nine months of 2009 was
32.2%, up slightly from 31.5% for the first half of 2009.
Capital
As of September25,2009, total capital was $255.07billion, consisting
of $65.35billion in total shareholders' equity (common shareholders'
equity of $58.40billion and preferred stock of $6.96billion) and
$189.72billion in unsecured long-term borrowings. Book value per common
share was $110.75 and tangible book value per common share(4)
was $101.39, an increase of 4% and 5%, respectively, during the quarter.
Book value and tangible book value per common share are based on common
shares outstanding, including restricted stock units granted to
employees with no future service requirements, of 527.3million at
period end.
On July22,2009, The Goldman Sachs Group, Inc. (Group Inc.) repurchased
in full from the U.S. Treasury the warrant to purchase 12.2million
shares of common stock that was issued to the U.S. Treasury pursuant to
the U.S. Treasury's TARP Capital Purchase Program. The purchase price
paid by Group Inc. to the U.S. Treasury for this warrant was
$1.1billion. This amount was recorded as a reduction to shareholders'
equity. Excluding this repurchase, book value and tangible book value
per common share(4) increased 6% and 7%, respectively,
during the quarter.
Under the regulatory capital guidelines currently applicable to bank
holding companies, the firm's Tier1 capital ratio under BaselI(3)
was 14.5% as of September25,2009, up from 13.8% as of June26,2009.
The firm's Tier1 common ratio(3) under BaselI
was 11.6% as of September25,2009, up from 10.9% as of June26,2009.
The firm's ratio of tangible common shareholders' equity(4)
to BaselI risk-weighted assets(3) was 13.1% as of
September25,2009, up from 12.4% as of June26,2009.
The firm also assesses its capital adequacy using an internal risk-based
methodology, which is generally consistent with BaselII. Under this
methodology, the firm's Tier1 capital ratio(3)
was 16.0% as of September25,2009.
Other Balance Sheet and Liquidity Metrics
Total assets(6) were $882billion as of
September25,2009, down slightly from June26,2009.
Level 3 assets(6) were approximately $50billion as
of September25,2009 (down from $54billion as of June26,2009) and
represented 5.7% of total assets.
Average global core excess (7) liquidity was $167billion
for the third quarter of 2009, down slightly from $171billion for the
second quarter of 2009.
Dividends
The Board of Directors of Group Inc. (the Board) declared a dividend of
$0.35 per common share to be paid on December30,2009 to common
shareholders of record on December2,2009. The Board also declared
dividends of $239.58, $387.50, $255.56 and $255.56 per share of SeriesA
Preferred Stock, SeriesB Preferred Stock, SeriesC Preferred Stock and
SeriesD Preferred Stock, respectively (represented by depositary
shares, each representing a 1/1,000th interest in a share of preferred
stock), to be paid on November10,2009 to preferred shareholders of
record on October26,2009. In addition, the Board declared a dividend
of $2,500 per share of SeriesG Preferred Stock to be paid on
November10,2009 to preferred shareholders of record on
October26,2009.
______________
The Goldman Sachs Group, Inc. is a leading global financial services
firm providing investment banking, securities and investment management
services to a substantial and diversified client base that includes
corporations, financial institutions, governments and high-net-worth
individuals. Founded in 1869, the firm is headquartered in New York and
maintains offices in London, Frankfurt, Tokyo, Hong Kong and other major
financial centers around the world.
Cautionary Note Regarding Forward-Looking
Statements
This press release contains "forward-looking statements" within the
meaning of the safe harbor provisions of the U.S. Private Securities
Litigation Reform Act of 1995. Forward-looking statements are not
historical facts but instead represent only the firm's beliefs regarding
future events, many of which, by their nature, are inherently uncertain
and outside of the firm's control. It is possible that the firm's actual
results and financial condition may differ, possibly materially, from
the anticipated results and financial condition indicated in these
forward-looking statements. For a discussion of some of the risks and
important factors that could affect the firm's future results and
financial condition, see "Risk Factors" in PartI, Item1A of the firm's
Annual Report on Form10-K for the fiscal year ended November28,2008
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in PartII, Item7 of the firm's Annual Report on
Form10-K for the fiscal year ended November28,2008.
Certain of the information regarding the firm's Tier1 capital ratios,
risk-weighted assets, total assets, level 3 assets and average global
core excess liquidity consist of preliminary estimates; these estimates
are forward-looking statements and are subject to change, possibly
materially, as the firm completes its quarterly financial statements.
Statements about the firm's investment banking transaction backlog also
may constitute forward-looking statements. Such statements are subject
to the risk that the terms of these transactions may be modified or that
they may not be completed at all; therefore, the net revenues, if any,
that the firm actually earns from these transactions may differ,
possibly materially, from those currently expected. Important factors
that could result in a modification of the terms of a transaction or a
transaction not being completed include, in the case of underwriting
transactions, a decline or continued weakness in general economic
conditions, outbreak of hostilities, volatility in the securities
markets generally or an adverse development with respect to the issuer
of the securities and, in the case of financial advisory transactions, a
decline in the securities markets, an inability to obtain adequate
financing, an adverse development with respect to a party to the
transaction or a failure to obtain a required regulatory approval. For a
discussion of other important factors that could adversely affect the
firm's investment banking transactions, see "Risk Factors" in PartI,
Item1A of the firm's Annual Report on Form10-K for the fiscal year
ended November28,2008 and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in PartII, Item7 of the
firm's Annual Report on Form10-K for the fiscal year ended
November28,2008.
Conference Call
A conference call to discuss the firm's results, outlook and related
matters will be held at 9:00 am (ET). The call will be open to the
public. Members of the public who would like to listen to the conference
call should dial 1-888-281-7154 (U.S. domestic) or 1-706-679-5627
(international). The number should be dialed at least 10 minutes prior
to the start of the conference call. The conference call will also be
accessible as an audio webcast through the Investor Relations section of
the firm's web site, www.gs.com/shareholders.
There is no charge to access the call. For those unable to listen to the
live broadcast, a replay will be available on the firm's web site or by
dialing 1-800-642-1687 (U.S. domestic) or 1-706-645-9291 (international)
passcode number 32860124, beginning approximately two hours after the
event. Please direct any questions regarding obtaining access to the
conference call to Goldman Sachs Investor Relations, via e-mail, at gs-investor-relations@gs.com.
THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
SEGMENT
NET REVENUES
(UNAUDITED)
$ in millions
Three Months Ended %ChangeFrom
September25, June 26, August 29, June 26, August 29,
2009 2009 2008 2009 2008
Investment Banking
Financial Advisory $ 325 $ 368 $ 619 (12 ) % (47 ) %
Equity underwriting 363 736 292 (51 ) 24
Debt underwriting 211 336 383 (37 ) (45 )
Total Underwriting 574 1,072 675 (46 ) (15 )
Total Investment Banking 899 1,440 1,294 (38 ) (31 )
Trading and Principal Investments
FICC 5,991 6,795 1,595 (12 ) N.M.
Equities trading 1,845 2,157 354 (14 ) N.M.
Equities commissions 930 1,021 1,208 (9 ) (23 )
Total Equities 2,775 3,178 1,562 (13 ) 78
ICBC 344 948 106 (64 ) N.M.
Other corporate and real estate gains and losses 911 (156 ) (581 ) N.M. N.M.
Overrides 6 19 22 (68 ) (73 )
Total Principal Investments 1,261 811 (453 ) 55 N.M.
Total Trading and Principal Investments 10,027 10,784 2,704 (7 ) N.M.