Exhibit 99.1
The Goldman Sachs Group, Inc. | 200 West Street | New York, New York 10282
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GOLDMAN SACHS REPORTS THIRD QUARTER EARNINGS PER COMMON SHARE OF $2.85 AND INCREASES THE QUARTERLY DIVIDEND TO $0.50 PER COMMON SHARE | | |  | |
NEW YORK, October 16, 2012 — The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of $8.35 billion and net earnings of $1.51 billion for the third quarter ended September 30, 2012. Diluted earnings per common share were $2.85 compared with a diluted loss per common share of $0.84 for the third quarter of 2011 and diluted earnings per common share of $1.78 for the second quarter of 2012. Annualized return on average common shareholders’ equity (ROE) (1) was 8.6% for the third quarter of 2012 and 8.8% for the first nine months of 2012.
Highlights
| • | | Goldman Sachs continued its leadership in investment banking, ranking first in worldwide announced and completed mergers and acquisitions for the year-to-date. (2) |
| • | | The firm ranked first in worldwide equity and equity-related offerings and common stock offerings for the year-to-date. (2) |
| • | | Book value per common share and tangible book value per common share (3) both increased approximately 3% during the quarter to $140.58 and $129.69, respectively. |
| • | | The firm continues to manage its liquidity and capital conservatively. The firm’s global core excess liquidity (4) was $170 billion (5) as of September 30, 2012. In addition, the firm’s Tier 1 capital ratio under Basel 1 (6) was 15.0%(5) and the firm’s Tier 1 common ratio under Basel 1 (7) was 13.1%(5) as of September 30, 2012. |
“This quarter’s performance was generally solid in the context of a still challenging economic environment,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “We continue to be disciplined in managing our operations and capital, while effectively serving our clients’ needs. The focus on these priorities will serve our shareholders and the firm well over the longer term.”
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Media Relations: Jake Siewert 212-902-5400 | | | | | | Investor Relations: Dane E. Holmes 212-902-0300 | |
Net Revenues
Investment Banking
Net revenues in Investment Banking were $1.16 billion, 49% higher than the third quarter of 2011 and 3% lower than the second quarter of 2012. Net revenues in Financial Advisory were $509 million, slightly lower compared with the third quarter of 2011. Net revenues in the firm’s Underwriting business were $655 million, more than double the amount in the third quarter of 2011, which had particularly low volumes. This increase primarily reflected significantly higher net revenues in debt underwriting, principally due to higher net revenues from leveraged finance activity. Net revenues in equity underwriting were higher compared with the third quarter of 2011, primarily reflecting an increase in client activity. The firm’s investment banking transaction backlog declined slightly compared with the end of the second quarter of 2012. (8)
Institutional Client Services
Net revenues in Institutional Client Services were $4.18 billion, 3% higher than the third quarter of 2011 and 8% higher than the second quarter of 2012.
Net revenues in Fixed Income, Currency and Commodities Client Execution were $2.22 billion, 28% higher than the third quarter of 2011. This increase reflected significantly higher net revenues in mortgages and higher net revenues in credit products, currencies and interest rate products, partially offset by significantly lower net revenues in commodities. During the third quarter of 2012, Fixed Income, Currency and Commodities Client Execution operated in an environment generally characterized by tighter credit spreads, as certain central banks took steps to ease monetary policy; however, broad market concerns persisted and levels of activity generally remained low.
Net revenues in Equities were $1.96 billion, 16% lower than the third quarter of 2011, primarily due to significantly lower commissions and fees, reflecting lower market volumes, and lower net revenues in equities client execution. In addition, net revenues in securities services were slightly lower compared with the third quarter of 2011, primarily reflecting the impact of lower average customer balances. During the quarter, Equities operated in an environment generally characterized by an increase in global equity prices and lower volatility levels.
The net loss attributable to the impact of changes in the firm’s own credit spreads on borrowings for which the fair value option was elected was $370 million ($225 million and $145 million related to Fixed Income, Currency and Commodities Client Execution and equities client execution, respectively) for the third quarter of 2012, compared with a net gain of $450 million ($308 million and $142 million related to Fixed Income, Currency and Commodities Client Execution and equities client execution, respectively) for the third quarter of 2011.
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Investing & Lending
Net revenues in Investing & Lending were $1.80 billion for the third quarter of 2012. Investing & Lending net revenues were positively impacted by tighter credit spreads and an increase in global equity prices. Results for the third quarter of 2012 included a gain of $99 million from the firm’s investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC), net gains of $824 million from other investments in equities, primarily in private equities, net gains and net interest income of $558 million from debt securities and loans, and other net revenues of $323 million, principally related to the firm’s consolidated investment entities.
Investment Management
Net revenues in Investment Management were $1.20 billion, 2% lower than the third quarter of 2011 and 10% lower than the second quarter of 2012. The decrease in net revenues compared with the third quarter of 2011 reflected lower transaction revenues and slightly lower management and other fees, partially offset by higher incentive fees. During the quarter, assets under management increased $20 billion to $856 billion, reflecting net market appreciation.
Expenses
Operating expenses were $6.05 billion, 40% higher than the third quarter of 2011 and 16% higher than the second quarter of 2012.
Compensation and Benefits
The accrual for compensation and benefits expenses (including salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as benefits) for the third quarter of 2012 was $3.68 billion, which was higher than the third quarter of 2011, due to higher net revenues. The ratio of compensation and benefits to net revenues for the first nine months of 2012 was 44.0%, consistent with the first nine months of 2011.
Non-Compensation Expenses
Non-compensation expenses were $2.38 billion, 13% lower than the third quarter of 2011 and 4% higher than the second quarter of 2012. The decrease compared with the third quarter of 2011 primarily reflected lower brokerage, clearing, exchange and distribution fees which principally reflected lower transaction volumes in Equities, lower expenses related to the U.K. bank levy (approximately $100 million related to the enactment of the U.K. bank levy was included in other expenses in the third quarter of 2011) and the impact of expense reduction initiatives. The third quarter of 2012 included net provisions for litigation and regulatory proceedings of $62 million.
Provision for Taxes
The effective income tax rate for the first nine months of 2012 was 33.5%, up slightly from 33.2% for the first half of 2012.
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Capital
As of September 30, 2012, total capital was $241.57 billion, consisting of $73.69 billion in total shareholders’ equity (common shareholders’ equity of $68.34 billion and preferred stock of $5.35 billion) and $167.88 billion in unsecured long-term borrowings. Book value per common share was $140.58 and tangible book value per common share (3) was $129.69, both approximately 3% higher compared with the end of the second quarter of 2012. 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 486.1 million at period end.
On September 4, 2012, The Goldman Sachs Group, Inc. (Group Inc.) issued 5,000.1 shares of Perpetual Non-Cumulative Preferred Stock, Series F (Series F Preferred Stock), for aggregate proceeds of $500 million.
During the quarter, the firm repurchased 11.8 million shares of its common stock at an average cost per share of $106.17, for a total cost of $1.25 billion. The remaining share authorization under the firm’s existing repurchase program is 34.2 million shares. (9)
Under the regulatory capital guidelines currently applicable to bank holding companies (Basel 1), the firm’s Tier 1 capital ratio (6) was 15.0%(5) and the firm’s Tier 1 common ratio (7) was 13.1%(5) as of September 30, 2012, both unchanged compared with June 30, 2012.
Other Balance Sheet and Liquidity Metrics
| • | | The firm’s global core excess liquidity (4) was $170 billion(5) as of September 30, 2012 and averaged $175 billion(5) for the third quarter of 2012, compared with an average of $174 billion for the second quarter of 2012. |
| • | | Total assets were $949 billion(5) as of September 30, 2012, unchanged compared with June 30, 2012. |
| • | | Level 3 assets were $48 billion(5) as of September 30, 2012, compared with $47 billion as of June 30, 2012 and represented 5.0% of total assets. |
Dividends
The Board of Directors of Group Inc. increased the firm’s quarterly dividend to $0.50 per common share from $0.46 per common share. The dividend will be paid on December 28, 2012 to common shareholders of record on November 30, 2012. The firm declared dividends of $247.40, $387.50, $263.89 and $263.89 per share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, respectively (represented by depositary shares, each representing a 1/1,000th interest in a share of preferred stock), to be paid on November 13, 2012 to preferred shareholders of record on October 29, 2012. In addition, the firm declared a dividend of $1,000.00 per share of Series E Preferred Stock and $1,000.00 per share of Series F Preferred Stock to be paid on December 3, 2012 to preferred shareholders of record on November 18, 2012.
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The Goldman Sachs Group, Inc. is a leading global investment banking, securities and investment management firm that provides a wide range of financial 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 all 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 Part I, Item 1A of the firm’s Annual Report on Form 10-K for the year ended December 31, 2011.
Certain of the information regarding the firm’s capital ratios, risk-weighted assets, total assets, level 3 assets and 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 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 Part I, Item 1A of the firm’s Annual Report on Form 10-K for the year ended December 31, 2011.
Conference Call
A conference call to discuss the firm’s results, outlook and related matters will be held at 9:30 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 1-855-859-2056 (U.S. domestic) or 1-404-537-3406 (international) passcode number 89062398, 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, atgs-investor-relations@gs.com.
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THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
SEGMENT NET REVENUES
(UNAUDITED)
$ in millions
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| | | Three Months Ended | | | | | | | % Change From | |
| | | September 30,
2012 | | | June 30,
2012 | | | September 30,
2011 | | | | | | | June 30,
2012 | | | September 30,
2011 | |
Investment Banking | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Advisory | | $ | 509 | | | $ | 469 | | | $ | 523 | | | | | | | | 9 | % | | | (3) | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Equity underwriting | | | 189 | | | | 239 | | | | 90 | | | | | | | | (21) | | | | 110 | |
Debt underwriting | | | 466 | | | | 495 | | | | 168 | | | | | | | | (6) | | | | 177 | |
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Total Underwriting | | | 655 | | | | 734 | | | | 258 | | | | | | | | (11) | | | | 154 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
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Total Investment Banking | | | 1,164 | | | | 1,203 | | | | 781 | | | | | | | | (3) | | | | 49 | |
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Institutional Client Services | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed Income, Currency and Commodities Client Execution | | | 2,224 | | | | 2,194 | | | | 1,731 | | | | | | | | 1 | | | | 28 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Equities client execution | | | 847 | | | | 510 | | | | 903 | | | | | | | | 66 | | | | (6) | |
Commissions and fees | | | 721 | | | | 776 | | | | 1,019 | | | | | | | | (7) | | | | (29) | |
Securities services | | | 392 | | | | 409 | | | | 409 | | | | | | | | (4) | | | | (4) | |
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Total Equities | | | 1,960 | | | | 1,695 | | | | 2,331 | | | | | | | | 16 | | | | (16) | |
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Total Institutional Client Services | | | 4,184 | | | | 3,889 | | | | 4,062 | | | | | | | | 8 | | | | 3 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Investing & Lending | | | | | | | | | | | | | | | | | | | | | | | | |
ICBC | | | 99 | | | | (194) | | | | (1,045) | | | | | | | | N.M. | | | | N.M. | |
Equity securities (excluding ICBC) | | | 824 | | | | (112) | | | | (1,004) | | | | | | | | N.M. | | | | N.M. | |
Debt securities and loans | | | 558 | | | | 222 | | | | (907) | | | | | | | | 151 | | | | N.M. | |
Other | | | 323 | | | | 287 | | | | 477 | | | | | | | | 13 | | | | (32) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Investing & Lending | | | 1,804 | | | | 203 | | | | (2,479) | | | | | | | | N.M. | | | | N.M. | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Investment Management | | | | | | | | | | | | | | | | | | | | | | | | |
Management and other fees | | | 1,016 | | | | 1,019 | | | | 1,044 | | | | | | | | — | | | | (3) | |
Incentive fees | | | 82 | | | | 217 | | | | 45 | | | | | | | | (62) | | | | 82 | |
Transaction revenues | | | 101 | | | | 96 | | | | 134 | | | | | | | | 5 | | | | (25) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Investment Management | | | 1,199 | | | | 1,332 | | | | 1,223 | | | | | | | | (10) | | | | (2) | |
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total net revenues | | $ | 8,351 | | | $ | 6,627 | | | $ | 3,587 | | | | | | | | 26 | | | | 133 | |
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| | | Nine Months Ended | | | % Change From | | | | | | | | | | | |
| | | September 30,
2012 | | | September 30,
2011 | | | September 30,
2011 | | | | | | | | | | | |
Investment Banking | | | | | | | | | | | | | | | | | | | | | | | | |
Financial Advisory | | $ | 1,467 | | | $ | 1,517 | | | | (3) | % | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Equity underwriting | | | 683 | | | | 894 | | | | (24) | | | | | | | | | | | | | |
Debt underwriting | | | 1,371 | | | | 1,087 | | | | 26 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Underwriting | | | 2,054 | | | | 1,981 | | | | 4 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Investment Banking | | | 3,521 | | | | 3,498 | | | | 1 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Institutional Client Services | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed Income, Currency and Commodities Client Execution | | | 7,876 | | | | 7,655 | | | | 3 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Equities client execution | | | 2,407 | | | | 2,505 | | | | (4) | | | | | | | | | | | | | |
Commissions and fees | | | 2,331 | | | | 2,851 | | | | (18) | | | | | | | | | | | | | |
Securities services | | | 1,168 | | | | 1,213 | | | | (4) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Equities | | | 5,906 | | | | 6,569 | | | | (10) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Institutional Client Services | | | 13,782 | | | | 14,224 | | | | (3) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Investing & Lending | | | | | | | | | | | | | | | | | | | | | | | | |
ICBC | | | 74 | | | | (905) | | | | N.M. | | | | | | | | | | | | | |
Equity securities (excluding ICBC) | | | 1,603 | | | | 736 | | | | 118 | | | | | | | | | | | | | |
Debt securities and loans | | | 1,365 | | | | 317 | | | | N.M. | | | | | | | | | | | | | |
Other | | | 876 | | | | 1,122 | | | | (22) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Investing & Lending | | | 3,918 | | | | 1,270 | | | | N.M. | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Investment Management | | | | | | | | | | | | | | | | | | | | | | | | |
Management and other fees | | | 3,038 | | | | 3,172 | | | | (4) | | | | | | | | | | | | | |
Incentive fees | | | 357 | | | | 182 | | | | 96 | | | | | | | | | | | | | |
Transaction revenues | | | 311 | | | | 416 | | | | (25) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total Investment Management | | | 3,706 | | | | 3,770 | | | | (2) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total net revenues | | $ | 24,927 | | | $ | 22,762 | | | | 10 | | | | | | | | | | | | | |
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THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
In millions, except per share amounts and total staff
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | | | | | % Change From | |
| | | September 30,
2012 | | | June 30,
2012 | | | September 30,
2011 | | | | | | | June 30,
2012 | | | September 30,
2011 | |
Revenues | | | | | | | | | | | | | | | | | | | | | | | | |
Investment banking | | $ | 1,168 | | | $ | 1,206 | | | $ | 781 | | | | | | | | (3) | % | | | 50 | % |
Investment management | | | 1,147 | | | | 1,266 | | | | 1,133 | | | | | | | | (9) | | | | 1 | |
Commissions and fees | | | 748 | | | | 799 | | | | 1,056 | | | | | | | | (6) | | | | (29) | |
Market making | | | 2,650 | | | | 2,097 | | | | 1,800 | | | | | | | | 26 | | | | 47 | |
Other principal transactions | | | 1,802 | | | | 169 | | | | (2,539) | | | | | | | | N.M. | | | | N.M. | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total non-interest revenues | | | 7,515 | | | | 5,537 | | | | 2,231 | | | | | | | | 36 | | | | N.M. | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Interest income | | | 2,629 | | | | 3,055 | | | | 3,354 | | | | | | | | (14) | | | | (22) | |
Interest expense | | | 1,793 | | | | 1,965 | | | | 1,998 | | | | | | | | (9) | | | | (10) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net interest income | | | 836 | | | | 1,090 | | | | 1,356 | | | | | | | | (23) | | | | (38) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net revenues, including net interest income | | | 8,351 | | | | 6,627 | | | | 3,587 | | | | | | | | 26 | | | | 133 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | |
Compensation and benefits | | | 3,675 | | | | 2,915 | | | | 1,578 | | | | | | | | 26 | | | | 133 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Brokerage, clearing, exchange and distribution fees | | | 547 | | | | 544 | | | | 668 | | | | | | | | 1 | | | | (18) | |
Market development | | | 123 | | | | 129 | | �� | | 140 | | | | | | | | (5) | | | | (12) | |
Communications and technology | | | 190 | | | | 202 | | | | 209 | | | | | | | | (6) | | | | (9) | |
Depreciation and amortization | | | 396 | | | | 409 | | | | 389 | | | | | | | | (3) | | | | 2 | |
Occupancy | | | 217 | | | | 214 | | | | 262 | | | | | | | | 1 | | | | (17) | |
Professional fees | | | 205 | | | | 213 | | | | 253 | | | | | | | | (4) | | | | (19) | |
Insurance reserves | | | 153 | | | | 121 | | | | 197 | | | | | | | | 26 | | | | (22) | |
Other expenses | | | 547 | | | | 465 | | | | 621 | | | | | | | | 18 | | | | (12) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total non-compensation expenses | | | 2,378 | | | | 2,297 | | | | 2,739 | | | | | | | | 4 | | | | (13) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total operating expenses | | | 6,053 | | | | 5,212 | | | | 4,317 | | | | | | | | 16 | | | | 40 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Pre-tax earnings / (loss) | | | 2,298 | | | | 1,415 | | | | (730) | | | | | | | | 62 | | | | N.M. | |
Provision / (benefit) for taxes | | | 786 | | | | 453 | | | | (337) | | | | | | | | 74 | | | | N.M. | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net earnings / (loss) | | | 1,512 | | | | 962 | | | | (393) | | | | | | | | 57 | | | | N.M. | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Preferred stock dividends | | | 54 | | | | 35 | | | | 35 | | | | | | | | 54 | | | | 54 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net earnings / (loss) applicable to common shareholders | | $ | 1,458 | | | $ | 927 | | | $ | (428) | | | | | | | | 57 | | | | N.M. | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Earnings / (loss) per common share (10) | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 2.95 | | | $ | 1.83 | | | $ | (0.84) | | | | | | | | 61 | % | | | N.M. | % |
Diluted | | | 2.85 | | | | 1.78 | | | | (0.84) | | | | | | | | 60 | | | | N.M. | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Average common shares outstanding | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | 491.2 | | | | 501.5 | | | | 518.2 | | | | | | | | (2) | | | | (5) | |
Diluted | | | 510.9 | | | | 520.3 | | | | 518.2 | | | | | | | | (2) | | | | (1) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Selected Data | | | | | | | | | | | | | | | | | | | | | | | | |
Total staff at period-end (11) | | | 32,600 | | | | 32,300 | | | | 34,200 | | | | | | | | 1 | | | | (5) | |
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THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
In millions, except per share amounts
| | | | | | | | | | | | | | | | |
| | | Nine Months Ended | | | | | | | % Change From | |
| | | September 30,
2012 | | | September 30,
2011 | | | | | | | September 30,
2011 | |
Revenues | | | | | | | | | | | | | | | | |
Investment banking | | $ | 3,534 | | | $ | 3,498 | | | | | | | | 1 | % |
Investment management | | | 3,518 | | | | 3,495 | | | | | | | | 1 | |
Commissions and fees | | | 2,407 | | | | 2,969 | | | | | | | | (19) | |
Market making | | | 8,652 | | | | 7,998 | | | | | | | | 8 | |
Other principal transactions | | | 3,909 | | | | 675 | | | | | | | | N.M. | |
| | | | | | | | | | | | | | | | |
Total non-interest revenues | | | 22,020 | | | | 18,635 | | | | | | | | 18 | |
| | | | | | | | | | | | | | | | |
Interest income | | | 8,517 | | | | 10,142 | | | | | | | | (16) | |
Interest expense | | | 5,610 | | | | 6,015 | | | | | | | | (7) | |
| | | | | | | | | | | | | | | | |
Net interest income | | | 2,907 | | | | 4,127 | | | | | | | | (30) | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Net revenues, including net interest income | | | 24,927 | | | | 22,762 | | | | | | | | 10 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | | | | |
Compensation and benefits | | | 10,968 | | | | 10,015 | | | | | | | | 10 | |
| | | | | | | | | | | | | | | | |
Brokerage, clearing, exchange and distribution fees | | | 1,658 | | | | 1,903 | | | | | | | | (13) | |
Market development | | | 369 | | | | 502 | | | | | | | | (26) | |
Communications and technology | | | 588 | | | | 617 | | | | | | | | (5) | |
Depreciation and amortization | | | 1,238 | | | | 1,351 | | | | | | | | (8) | |
Occupancy | | | 643 | | | | 781 | | | | | | | | (18) | |
Professional fees | | | 652 | | | | 749 | | | | | | | | (13) | |
Insurance reserves | | | 431 | | | | 402 | | | | | | | | 7 | |
Other expenses | | | 1,486 | | | | 1,520 | | | | | | | | (2) | |
| | | | | | | | | | | | | | | | |
Total non-compensation expenses | | | 7,065 | | | | 7,825 | | | | | | | | (10) | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 18,033 | | | | 17,840 | | | | | | | | 1 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Pre-tax earnings | | | 6,894 | | | | 4,922 | | | | | | | | 40 | |
Provision for taxes | | | 2,311 | | | | 1,493 | | | | | | | | 55 | |
| | | | | | | | | | | | | | | | |
Net earnings | | | 4,583 | | | | 3,429 | | | | | | | | 34 | |
| | | | | | | | | | | | | | | | |
Preferred stock dividends | | | 124 | | | | 1,897 | | | | | | | | (93) | |
| | | | | | | | | | | | | | | | |
Net earnings applicable to common shareholders | | $ | 4,459 | | | $ | 1,532 | | | | | | | | 191 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Earnings per common share | | | | | | | | | | | | | | | | |
Basic (10) | | $ | 8.85 | | | $ | 2.84 | | | | | | | | N.M. | % |
Diluted | | | 8.57 | | | | 2.70 | | | | | | | | N.M. | |
| | | | | | | | | | | | | | | | |
Average common shares outstanding | | | | | | | | | | | | | | | | |
Basic | | | 501.1 | | | | 530.1 | | | | | | | | (5) | |
Diluted | | | 520.1 | | | | 566.6 | | | | | | | | (8) | |
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THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | |
Average Daily VaR(12) $ in millions | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | | | | | | |
| | | September 30,
2012 | | | June 30,
2012 | | | September 30,
2011 | | | | | | | | | | | |
Risk Categories | | | | | | | | | | | | | | | | | | | | | | | | |
Interest rates | | $ | 73 | | | $ | 83 | | | $ | 90 | | | | | | | | | | | | | |
Equity prices | | | 21 | | | | 23 | | | | 24 | | | | | | | | | | | | | |
Currency rates | | | 12 | | | | 16 | | | | 15 | | | | | | | | | | | | | |
Commodity prices | | | 22 | | | | 20 | | | | 25 | | | | | | | | | | | | | |
Diversification effect (12) | | | (47) | | | | (50) | | | | (52) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total | | $ | 81 | | | $ | 92 | | | $ | 102 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
|
Assets Under Management (13) $ in billions | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of | | | | | | | % Change From | |
| | | September 30,
2012 | | | June 30,
2012 | | | September 30,
2011 | | | | | | | June 30,
2012 | | | September 30,
2011 | |
Asset Class | | | | | | | | | | | | | | | | | | | | | | | | |
Alternative investments | | $ | 136 | | | $ | 137 | | | $ | 144 | | | | | | | | (1) | % | | | (6) | % |
Equity | | | 135 | | | | 127 | | | | 123 | | | | | | | | 6 | | | | 10 | |
Fixed income | | | 378 | | | | 363 | | | | 347 | | | | | | | | 4 | | | | 9 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total non-money market assets | | | 649 | | | | 627 | | | | 614 | | | | | | | | 4 | | | | 6 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Money markets | | | 207 | | | | 209 | | | | 207 | | | | | | | | (1) | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total assets under management | | $ | 856 | | | $ | 836 | | | $ | 821 | | | | | | | | 2 | | | | 4 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | | | | | | |
| | | September 30,
2012 | | | June 30,
2012 | | | September 30,
2011 | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | | $ | 836 | | | $ | 824 | | | $ | 844 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net inflows / (outflows) | | | | | | | | | | | | | | | | | | | | | | | | |
Alternative investments | | | (3) | | | | (1) | | | | — | | | | | | | | | | | | | |
Equity | | | (1) | | | | (2) | | | | — | | | | | | | | | | | | | |
Fixed income | | | 5 | | | | 12 | | | | (5) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total non-money market net inflows / (outflows) | | | 1 | | | | 9 | | | | (5) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Money markets | | | (2) | | | | 7 | | | | 11 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total net inflows / (outflows) (14) | | | (1) | | | | 16 | | | | 6 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net market appreciation / (depreciation) | | | 21 | | | | (4) | | | | (29) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance, end of period | | $ | 856 | | | $ | 836 | | | $ | 821 | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
- 9 -
Footnotes
| (1) | Annualized ROE is computed by dividing annualized net earnings applicable to common shareholders by average monthly common shareholders’ equity. The table below presents the firm’s average common shareholders’ equity: |
| | | | | | | | |
| Unaudited, in millions | | Three Months Ended September 30, 2012 | | | Nine Months Ended September 30, 2012 | |
| |
Total shareholders’ equity | | $ | 73,043 | | | $ | 71,750 | |
Preferred stock | | | (4,975) | | | | (3,850) | |
| |
Common shareholders’ equity | | $ | 68,068 | | | $ | 67,900 | |
| |
| (2) | Thomson Reuters — January 1, 2012 through September 30, 2012. |
| (3) | Tangible common shareholders’ equity equals total shareholders’ equity less preferred stock, goodwill and identifiable intangible assets. Tangible book value per common share is computed by dividing tangible common shareholders’ equity by the number of common shares outstanding, including restricted stock units granted to employees with no future service requirements. Management believes that tangible common shareholders’ equity and tangible book value per common share are meaningful because they are measures that the firm and investors use to assess capital adequacy. Tangible common shareholders’ equity and tangible book value per common share are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other companies. The table below presents the reconciliation of total shareholders’ equity to tangible common shareholders’ equity: |
| | | | |
| Unaudited, in millions | | September 30, 2012 | |
| |
Total shareholders’ equity | | $ | 73,687 | |
Preferred stock | | | (5,350) | |
| |
Common shareholders’ equity | | | 68,337 | |
Goodwill and identifiable intangible assets | | | (5,296) | |
| |
Tangible common shareholders’ equity | | $ | 63,041 | |
| |
| (4) | The firm’s global core excess represents a pool of excess liquidity consisting of unencumbered, highly liquid securities and cash. For a further discussion of the firm’s global core excess liquidity pool, see “Liquidity Risk Management” in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the firm’s Quarterly Report on Form 10-Q for the period ended June 30, 2012. |
| (5) | Represents a preliminary estimate as of the date of this earnings release and may be revised in the firm’s Quarterly Report on Form 10-Q for the period ended September 30, 2012. |
| (6) | The Tier 1 capital ratio equals Tier 1 capital divided by risk-weighted assets. The firm’s risk-weighted assets under the Board of Governors of the Federal Reserve System’s general risk-based capital requirements (Basel 1) were approximately $435 billion as of September 30, 2012. For a further discussion of the firm’s capital ratios, see “Equity Capital” in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the firm’s Quarterly Report on Form 10-Q for the period ended June 30, 2012. |
| (7) | The Tier 1 common ratio equals Tier 1 common capital divided by risk-weighted assets. As of September 30, 2012, Tier 1 common capital was $57.13 billion, consisting of Tier 1 capital of $65.23 billion less preferred stock of $5.35 billion and junior subordinated debt issued to trusts of $2.75 billion. Management believes that the Tier 1 common ratio is meaningful because it is one of the measures that the firm and investors use to assess capital adequacy. The Tier 1 common ratio is a non‑GAAP measure and may not be comparable to similar non-GAAP measures used by other companies. For a further discussion of the firm’s capital ratios, see “Equity Capital” in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the firm’s Quarterly Report on Form 10-Q for the period ended June 30, 2012. |
| (8) | The firm’s investment banking transaction backlog represents an estimate of the firm’s future net revenues from investment banking transactions where management believes that future revenue realization is more likely than not. |
| (9) | The remaining share authorization represents the shares that may be repurchased under the repurchase program approved by the Board of Directors. As disclosed in “Note 19. Shareholders’ Equity” in Part I, Item 1 “Financial Statements” in the firm’s Quarterly Report on Form 10-Q for the period ended June 30, 2012, share repurchases require approval by the Board of Governors of the Federal Reserve System. |
| (10) | Unvested share-based payment awards that have non-forfeitable rights to dividends or dividend equivalents are treated as a separate class of securities in calculating earnings per common share. The impact of applying this methodology was a reduction in basic earnings per common share of $0.02 for both the three months ended September 30, 2012 and June 30, 2012, and $0.05 for both the nine months ended September 30, 2012 and September 30, 2011. In addition, the impact of applying this methodology for the three months ended September 30, 2011 was a loss per common share (basic and diluted) of $0.01. |
| (11) | Includes employees, consultants and temporary staff. |
| (12) | VaR is the potential loss in value of the firm’s inventory positions due to adverse market movements over a one-day time horizon with a 95% confidence level. Diversification effect equals the difference between total VaR and the sum of the VaRs for the four risk categories. For a further discussion of VaR and the diversification effect, see “Market Risk Management” in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the firm’s Quarterly Report on Form 10-Q for the period ended June 30, 2012. |
| (13) | Assets under management include client assets where the firm earns a fee for managing assets on a discretionary basis. |
| (14) | Three months ended June 30, 2012 includes $17 billion of fixed income asset inflows in connection with the firm’s acquisition of Dwight Asset Management Company LLC. Three months ended September 30, 2011 includes $6 billion of asset inflows across all asset classes in connection with the firm’s acquisitions of Goldman Sachs Australia Pty Ltd and Benchmark Asset Management Company Private Limited. |
- 10 -
