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Goldman Sachs Reports Second Quarter Earnings Per Common Share
Goldman Sachs Reports Second Quarter Earnings Per Common Share of $4.93
Record Quarterly Net Revenues of $13.8 Billion
Business Wire
NEW YORK -- July 14, 2009
The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of
$13.76 billion and net earnings of $3.44 billion for its second quarter ended
June 26, 2009. Diluted earnings per common share were $4.93 compared with
$4.58 for the second quarter ended May 30, 2008 and $3.39 for the first
quarter ended March 27, 2009. Annualized return on average common
shareholders’ equity (ROE) ^(1) was 23.0% for the second quarter of 2009 and
18.3% for the first half of 2009.
Excluding a one-time preferred dividend of $426 million related to the
repurchase of the firm’s TARP preferred stock, diluted earnings per common
share were $5.71 ^(2) for the second quarter of 2009 and annualized ROE was
23.8% ^(2) for the second quarter of 2009 and 19.2% ^(2) for the first half of
2009.
Business Highlights
* Goldman Sachs ranked first in worldwide announced mergers and acquisitions
for the calendar year-to-date. ^(3)
* Equity underwriting produced record quarterly net revenues of $736
million, surpassing the previous record set in the second quarter of 2000.
* Fixed Income, Currency and Commodities (FICC) generated record quarterly
net revenues of $6.80 billion, reflecting strength across most businesses,
including record results in credit products.
* Equities generated record quarterly net revenues of $3.18 billion,
reflecting strong results across the client franchise businesses.
* On June 17, 2009, the firm repurchased the preferred stock that was issued
to the U.S. Treasury pursuant to its TARP Capital Purchase Program. In
addition, the firm completed a public offering of common stock for
proceeds of $5.75 billion during the quarter.
* Book value per common share increased approximately 8% during the quarter
to $106.41 and tangible book value per common share ^(4) increased
approximately 10% during the quarter to $96.94.
______________
“While markets remain fragile and we recognize the challenges the broader
economy faces, our second quarter results reflected the combination of
improving financial market conditions and a deep and diverse client
franchise,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer.
“Our role as an intermediary focused on making markets for buyers and sellers
helped drive our performance. We were also active as an underwriter of many
significant debt and equity offerings for clients.”
Net Revenues
Investment Banking
Net revenues in Investment Banking were $1.44 billion, 15% lower than the
second quarter of 2008 and 75% higher than the first quarter of 2009.
Net revenues in Financial Advisory were $368 million, 54% lower than the
second quarter of 2008, primarily reflecting a significant decline in
industry-wide completed mergers and acquisitions. Net revenues in the firm’s
Underwriting business were $1.07 billion, 21% higher than the second quarter
of 2008, due to significantly higher net revenues in equity underwriting, as
well as higher net revenues in debt underwriting. The increase in equity
underwriting reflected very strong client activity. The increase in debt
underwriting primarily reflected higher net revenues from investment-grade and
municipal activity. The firm’s investment banking transaction backlog
decreased during the quarter. ^(5)
Trading and Principal Investments
Net revenues in Trading and Principal Investments were $10.78 billion, 93%
higher than the second quarter of 2008 and 51% higher than the first quarter
of 2009.
Net revenues in FICC were $6.80 billion, significantly higher than the second
quarter of 2008. These results reflected particularly strong performances in
credit products, interest rate products and currencies, reflecting strength in
the client franchise. In addition, net revenues in both mortgages and
commodities were higher compared with the second quarter of 2008. Results in
mortgages included a loss of approximately $700 million on commercial mortgage
loans. During the quarter, FICC operated in an environment characterized by
strong client-driven activity, particularly in more liquid products, favorable
market opportunities and tighter corporate credit spreads.
Net revenues in Equities were $3.18 billion, 28% higher than the second
quarter of 2008, reflecting significantly higher net revenues in derivatives
and, to a lesser extent, principal strategies. In addition, net revenues in
shares were solid, but essentially unchanged compared with the second quarter
of 2008. Commissions declined compared with the second quarter of 2008. During
the quarter, Equities operated in an environment characterized by solid
client-driven activity, favorable market opportunities, a significant increase
in global equity prices and a decline in volatility levels.
Principal Investments recorded net revenues of $811 million for the second
quarter of 2009. These results included a gain of $948 million related to the
firm’s investment in the ordinary shares of Industrial and Commercial Bank of
China Limited (ICBC), a gain of $343 million from corporate principal
investments and a loss of $499 million from real estate principal investments.
Asset Management and Securities Services
Net revenues in Asset Management and Securities Services were $1.54 billion,
28% lower than the second quarter of 2008 and 6% higher than the first quarter
of 2009.
Asset Management net revenues were $922 million, 21% lower than the second
quarter of 2008, reflecting lower assets under management, principally due to
market depreciation since the end of the second quarter of 2008. During the
second quarter of 2009, assets under management increased $48 billion to
$819 billion ^(6), due to $42 billion of market appreciation, primarily in
equity and fixed income assets, and $6 billion of net inflows.
Securities Services net revenues were $615 million, 38% lower than the second
quarter of 2008. The decrease in net revenues primarily reflected the impact
of lower customer balances compared with the second quarter of 2008.
Expenses
Operating expenses were $8.73 billion, 33% higher than the second quarter of
2008 and 28% higher than the first 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 $6.65 billion, which was
higher than the second quarter of 2008, primarily due to higher net revenues.
The ratio of compensation and benefits to net revenues was 49.0% for the first
half of 2009. Total staff decreased 1% during the quarter.
Non-Compensation Expenses
Non-compensation expenses, excluding consolidated entities held for investment
purposes ^(7), were $1.80 billion, 8% lower than the second quarter of 2008
and 11% higher than the first quarter of 2009. The decrease compared with the
second quarter of 2008 was attributable to lower brokerage, clearing, exchange
and distribution fees, principally reflecting lower transaction volumes in
Equities. In addition, non-compensation expenses during the second quarter of
2009 were generally lower than the second quarter of 2008 principally due to
the impact of reduced staff levels and the effect of expense reduction
initiatives. These decreases were partially offset by the impact of higher
FDIC fees on bank deposits, including the impact of a special assessment of
approximately $50 million, and net provisions for litigation and regulatory
proceedings of $25 million. The increase in non-compensation expenses related
to consolidated entities held for investment purposes reflected real estate
impairment charges of approximately $170 million during the second quarter of
2009. Including consolidated investment entities held for investment purposes,
non-compensation expenses were $2.08 billion, essentially unchanged from the
second quarter of 2008 and the first quarter of 2009.
Provision for Taxes
The effective income tax rate for the first half of 2009 was 31.5%, up
slightly from 31.0% for the first quarter of 2009.
Capital
As of June 26, 2009, total capital was $254.05 billion, consisting of
$62.81 billion in total shareholders’ equity (common shareholders’ equity of
$55.86 billion and preferred stock of $6.96 billion) and $191.24 billion in
unsecured long-term borrowings. Book value per common share was $106.41 and
tangible book value per common share ^(4) was $96.94, an increase of
approximately 8% and 10%, 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 524.9 million at period end.
During the quarter, The Goldman Sachs Group, Inc. (Group Inc.) completed a
public offering of 46.7 million common shares at $123.00 per share for total
proceeds of $5.75 billion.
On June 17, 2009, Group Inc. repurchased from the U.S. Treasury the 10.0
million shares of the firm’s Fixed Rate Cumulative Perpetual Preferred Stock,
Series H, that were issued to the U.S. Treasury pursuant to the U.S.
Treasury’s TARP Capital Purchase Program. The aggregate purchase price paid by
Group Inc. to the U.S. Treasury for the Preferred Stock was $10.04 billion
(including accrued dividends). The repurchase included a one-time preferred
dividend of $426 million, which is included in our results for the second
quarter of 2009.
Under the regulatory capital guidelines currently applicable to bank holding
companies, the firm’s Tier 1 capital ratio under Basel I ^(8) was 13.8% as of
June 26, 2009, up from 13.7% as of March 27, 2009. Under the capital
guidelines applicable to the firm when it was regulated by the SEC as a
Consolidated Supervised Entity, the firm’s Tier 1 capital ratio under
Basel II ^(8) was 16.1% as of June 26, 2009, up from 16.0% as of
March 27, 2009.
Other Balance Sheet and Liquidity Metrics
* Total assets ^(9) were $890 billion as of June 26, 2009, down 4% from
March 27, 2009.
* Level 3 assets ^(10) were approximately $54 billion as of June 26, 2009
(down from $59 billion as of March 27, 2009) and represented 6.1% of total
assets.
* Average global core excess ^(11) liquidity was $170.95 billion for the
second quarter of 2009, up from $163.74 billion for the first 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 September 24, 2009 to common shareholders of
record on August 25, 2009. The Board also declared dividends of $236.98,
$387.50, $252.78 and $252.78 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 August 10, 2009 to
preferred shareholders of record on July 26, 2009. In addition, the Board
declared a dividend of $2,500 per share of Series G Preferred Stock to be paid
on August 10, 2009 to preferred shareholders of record on July 26, 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 Private Securities Litigation Reform Act of
1995. These 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 fiscal year ended November 28, 2008 and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in
Part II, Item 7 of the firm’s Annual Report on Form 10-K for the fiscal year
ended November 28, 2008.
Certain of the information regarding the firm’s Tier 1 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 Part I, Item 1A of the firm’s
Annual Report on Form 10-K for the fiscal year ended November 28, 2008 and
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Part II, Item 7 of the firm’s Annual Report on Form 10-K for
the fiscal year ended November 28, 2008.
Conference Call
A conference call to discuss the firm’s results, outlook and related matters
will be held at 11:00 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 17367491, 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 % Change From
June 26, March 27, May 30, March May
27, 30,
2009 2009 2008 2009 2008
Investment
Banking
Financial $ 368 $ 527 $ 800 (30 ) % (54 ) %
Advisory
Equity 736 48 616 N.M. 19
underwriting
Debt 336 248 269 35 25
underwriting
Total 1,072 296 885 N.M. 21
Underwriting
Total
Investment 1,440 823 1,685 75 (15 )
Banking
Trading and
Principal
Investments
FICC 6,795 6,557 2,379 4 186
Equities 2,157 1,027 1,253 110 72
trading
Equities 1,021 974 1,234 5 (17 )
commissions
Total Equities 3,178 2,001 2,487 59 28
ICBC 948 (151 ) 214 N.M. N.M.
Other
corporate and
real estate (156 ) (1,261 ) 476 N.M. N.M.
gains and
losses
Overrides 19 4 35 N.M. (46 )
Total
Principal 811 (1,408 ) 725 N.M. 12
Investments
Total Trading
and Principal 10,784 7,150 5,591 51 93
Investments
Asset
Management and
Securities
Services
Management and 918 931 1,153 (1 ) (20 )
other fees
Incentive fees 4 18 8 (78 ) (50 )
Total Asset 922 949 1,161 (3 ) (21 )
Management
Securities 615 503 985 22 (38 )
Services
Total Asset
Management and 1,537 1,452 2,146 6 (28 )
Securities
Services
Total net $ 13,761 $ 9,425 $ 9,422 46 46
revenues
% Change
Six Months Ended
From
June 26, May 30, May 30,
2009 2008 2008
Investment
Banking
Financial $ 895 $ 1,463 (39 ) %
Advisory
Equity 784 788 (1 )
underwriting
Debt 584 606 (4 )
underwriting
Total 1,368 1,394 (2 )
Underwriting
Total
Investment 2,263 2,857 (21 )
Banking
Trading and
Principal
Investments
FICC 13,352 5,521 142
Equities 3,184 2,529 26
trading
Equities 1,995 2,472 (19 )
commissions
Total Equities 5,179 5,001 4
ICBC 797 79 N.M.
Other
corporate and
real estate (1,417 ) 66 N.M.
gains and
losses
Overrides 23 48 (52 )
Total
Principal (597 ) 193 N.M.
Investments
Total Trading
and Principal 17,934 10,715 67
Investments
Asset
Management and
Securities
Services
Management and 1,849 2,276 (19 )
other fees
Incentive fees 22 202 (89 )
Total Asset 1,871 2,478 (24 )
Management
Securities 1,118 1,707 (35 )
Services
Total Asset
Management and 2,989 4,185 (29 )
Securities
Services
Total net $ 23,186 $ 17,757 31
revenues
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
June 26, March 27, May 30, March May
27, 30,
2009 2009 2008 2009 2008
Revenues
Investment $ 1,440 $ 823 $ 1,685 75 % (15 ) %
banking
Trading and
principal 9,322 5,706 5,239 63 78
investments
Asset management
and securities 957 989 1,221 (3 ) (22 )
services
Total
non-interest 11,719 7,518 8,145 56 44
revenues
Interest income 3,470 4,362 9,498 (20 ) (63 )
Interest expense 1,428 2,455 8,221 (42 ) (83 )
Net interest 2,042 1,907 1,277 7 60
income
Net revenues,
including net 13,761 9,425 9,422 46 46
interest income
Operating
expenses
Compensation and 6,649 4,712 4,522 41 47
benefits
Brokerage,
clearing, 574 536 741 7 (23 )
exchange and
distribution fees
Market 82 68 126 21 (35 )
development
Communications 173 173 192 - (10 )
and technology
Depreciation and
amortization 426 549 220 (22 ) 94
^(12)
Occupancy 242 241 234 - 3
Professional fees 145 135 185 7 (22 )
Other expenses 441 382 370 15 19
Total
non-compensation 2,083 2,084 2,068 - 1
expenses
Total operating 8,732 6,796 6,590 28 33
expenses
Pre-tax earnings 5,029 2,629 2,832 91 78
Provision for 1,594 815 745 96 114
taxes
Net earnings 3,435 1,814 2,087 89 65
Preferred stock 717 155 36 N.M. N.M.
dividends
Net earnings
applicable to $ 2,718 $ 1,659 $ 2,051 64 33
common
shareholders
Earnings per
common share
Basic ^(13) $ 5.27 $ 3.48 $ 4.80 51 % 10 %
Diluted 4.93 3.39 4.58 45 8
Average common
shares
outstanding
Basic 514.1 477.4 427.5 8 20
Diluted 551.0 489.2 447.4 13 23
Selected Data
Total staff at 29,400 29,800 35,000 (1 ) (16 )
period end ^ (14)
THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
In millions, except per share amounts
% Change
Six Months Ended
From
June 26, May 30, May 30,
2009 2008 2008
Revenues
Investment banking $ 2,263 $ 2,851 (21 ) %
Trading and principal investments 15,028 10,116 49
Asset management and securities 1,946 2,562 (24 )
services
Total non-interest revenues 19,237 15,529 24
Interest income 7,832 20,743 (62 )
Interest expense 3,883 18,515 (79 )
Net interest income 3,949 2,228 77
Net revenues, including net interest 23,186 17,757 31
income
Operating expenses
Compensation and benefits 11,361 8,523 33
Brokerage, clearing, exchange and 1,110 1,531 (27 )
distribution fees
Market development 150 270 (44 )
Communications and technology 346 379 (9 )
Depreciation and amortization ^(12) 975 474 106
Occupancy 483 470 3
Professional fees 280 363 (23 )
Other expenses 823 772 7
Total non-compensation expenses 4,167 4,259 (2 )
Total operating expenses 15,528 12,782 21
Pre-tax earnings 7,658 4,975 54
Provision for taxes 2,409 1,377 75
Net earnings 5,249 3,598 46
Preferred stock dividends 872 80 N.M.
Net earnings applicable to common $ 4,377 $ 3,518 24
shareholders
Earnings per common share
Basic ^(13) $ 8.81 $ 8.18 8 %
Diluted 8.42 7.81 8
Average common shares outstanding
Basic 495.7 430.3 15
Diluted 520.1 450.6 15
NON-COMPENSATION EXPENSES
(UNAUDITED)
$ in millions
Three Months Ended % Change From
June 26, March 27, May 30, March May
27, 30,
2009 2009 2008 2009 2008
Non-compensation
expenses of $ 286 $ 460 $ 123 (38 ) % 133 %
consolidated
investments ^(7)
Non-compensation
expenses excluding
consolidated
investments
Brokerage, clearing,
exchange and 574 536 741 7 (23 )
distribution fees
Market development 80 66 124 21 (35 )
Communications and 171 172 191 (1 ) (10 )
technology
Depreciation and 220 201 184 9 20
amortization ^(12)
Occupancy 223 208 211 7 6
Professional fees 143 133 181 8 (21 )
Other expenses 386 308 313 25 23
Subtotal 1,797 1,624 1,945 11 (8 )
Total
non-compensation $ 2,083 $ 2,084 $ 2,068 - 1
expenses, as
reported
% Change
Six Months Ended
From
June 26, May 30, May 30,
2009 2008 2008
Non-compensation
expenses of $ 746 $ 248 N.M. %
consolidated
investments ^(7)
Non-compensation
expenses excluding
consolidated
investments
Brokerage, clearing,
exchange and 1,110 1,531 (27 )
distribution fees
Market development 146 265 (45 )
Communications and 343 377 (9 )
technology
Depreciation and 421 413 2
amortization ^(12)
Occupancy 431 428 1
Professional fees 276 357 (23 )
Other expenses 694 640 8
Subtotal 3,421 4,011 (15 )
Total
non-compensation $ 4,167 $ 4,259 (2 )
expenses, as
reported
THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(UNAUDITED)
Average Daily VaR ^(15)
$ in millions
Three Months Ended
June 26, March 27, May 30,
2009 2009 2008
Risk Categories
Interest rates $ 205 $ 218 $ 144
Equity prices 60 38 79
Currency rates 39 38 32
Commodity 40 40 48
prices
Diversification (99 ) (94 ) (119 )
effect ^(16)
Total $ 245 $ 240 $ 184
Assets Under Management ^(17)
$ in billions
As of % Change From
June 30, March 31, May 31, March May
31, 31,
2009 2009 2008 2009 2008
Asset Class
Alternative $ 142 $ 141 $ 146 1 % (3 ) %
investments
Equity 121 101 211 20 (43 )
Fixed income 272 248 269 10 1
Total non-money 535 490 626 9 (15 )
market assets
Money markets 284 281 269 1 6
Total assets
under $ 819 ^(6) $ 771 ^(6) $ 895 6 (8 )
management
Three Months Ended
June 30, March 31, May 31,
2009 2009 2008
Balance,
beginning of $ 771 $ 798 $ 873
period
Net inflows /
(outflows)
Alternative (2 ) (2 ) (3 )
investments
Equity (1 ) (1 ) (18 )
Fixed income 6 (3 ) 10
Total non-money
market net 3 (6 ) (11 )
inflows /
(outflows)
Money markets 3 (5 ) 17
Total net
inflows / 6 ^(6) (11 ) ^(6) 6
(outflows)
Net market
appreciation / 42 (16 ) 16
(depreciation)
Balance, end of $ 819 $ 771 $ 895
period
Principal Investments ^ (18)
$ in millions
As of June 26, 2009
Corporate Real Total
Estate
Private $ 9,407 $ 1,812 $ 11,219
Public 1,747 43 1,790
Subtotal 11,154 1,855 13,009
ICBC ordinary 6,269 - 6,269
shares ^(19)
Total $ 17,423 ^(20) $ 1,855 $ 19,278
Footnotes
Annualized return on average common shareholders’ equity (ROE) is
computed by dividing annualized net earnings applicable to common
shareholders by average monthly common shareholders’ equity. The
one-time preferred dividend of $426 million related to the repurchase
(1) of the firm’s TARP preferred stock (calculated as the difference
between the carrying value and the redemption value of the preferred
stock) was not annualized in the calculation of annualized net
earnings applicable to common shareholders since it has no impact on
other quarters in the year. The following table sets forth our average
common shareholders’ equity:
Average for the
Three Six Months
Months Ended
Ended
June 26,
June 26, 2009
2009
(unaudited, $ in
millions)
Total
shareholders' $ 66,870 $ 65,167
equity
Preferred (14,125 ) (15,139 )
stock
Common
shareholders' $ 52,745 $ 50,028
equity
Management believes that presenting the firm’s results excluding the
impact of the one-time preferred dividend of $426 million related to
the repurchase of the firm’s TARP preferred stock is meaningful
(2) because it increases the comparability of period-to-period results.
The following tables set forth the calculation of net earnings
applicable to common shareholders, diluted earnings per common share
and average common shareholders’ equity excluding the impact of this
one-time preferred dividend:
For the
Three Months Ended Six Months Ended
June 26, 2009 June 26, 2009
(unaudited, in millions, except
per share amounts)
Net earnings applicable to $ 2,718 $ 4,377
common shareholders
Impact of one-time TARP 426 426
preferred dividend
Net earnings applicable to
common shareholders, excluding
the 3,144 4,803
impact of one-time TARP
preferred dividend
Divided by: average diluted 551.0 520.1
common shares outstanding
Diluted earnings per common
share, excluding the impact of $ 5.71 $ 9.23
one-time
TARP preferred dividend
Average for the
Three Months Ended Six Months Ended
June 26, 2009 June 26, 2009
(unaudited, $ in millions)
Total shareholders' equity $ 66,870 $ 65,167
Preferred stock (14,125 ) (15,139 )
Common shareholders' equity 52,745 50,028
Impact of one-time TARP
preferred dividend on average 107 61
common
shareholders’ equity
Common shareholders' equity,
excluding the impact of
one-time TARP $ 52,852 $ 50,089
preferred dividend on average
common shareholders’ equity
(3) Thomson Reuters – January 1, 2009 through June 26, 2009.
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
(4) outstanding, including restricted stock units granted to employees
with no future service requirements. Management believes that tangible
common shareholders’ equity is meaningful because it is one of the
measures that the firm and investors use to assess capital adequacy.
The following table sets forth the reconciliation of total
shareholders' equity to tangible common shareholders' equity:
As of
June 26,
2009
(unaudited,
$ in
millions)
Total
shareholders' $ 62,813
equity
Preferred (6,957 )
stock
Common
shareholders' 55,856
equity
Goodwill and
identifiable (4,973 )
intangible
assets
Tangible
common $ 50,883
shareholders'
equity
The firm’s investment banking transaction backlog represents an
(5) estimate of the firm’s future net revenues from investment banking
transactions where management believes that future revenue realization
is more likely than not.
(6) Excludes the federal agency pass-through mortgage-backed securities
account managed for the Federal Reserve.
Consolidated entities held for investment purposes are entities that
are held strictly for capital appreciation, have a defined exit
strategy and are engaged in activities that are not closely related to
the firm's principal businesses. For example, these investments include
(7) consolidated entities that hold real estate assets, such as hotels, but
exclude investments in entities that primarily hold financial assets.
Management believes that it is meaningful to review non-compensation
expenses excluding expenses related to these consolidated entities in
order to evaluate trends in non-compensation expenses related to the
firm's principal business activities.
As a bank holding company, the firm is subject to regulatory capital
requirements administered by the Federal Reserve Board. The firm is
reporting its Tier 1 capital ratio in accordance with the regulatory
capital requirements currently applicable to bank holding companies,
which are based on the Capital Accord of the Basel Committee on Banking
Supervision (Basel I). The Tier 1 capital ratio equals Tier 1 capital
divided by total risk-weighted assets. The firm’s risk-weighted assets
under Basel I were approximately $409 billion as of June 26, 2009. The
firm continues to disclose its Tier 1 capital ratio in accordance with
the capital guidelines applicable to it when the firm was regulated by
the SEC as a Consolidated Supervised Entity. These guidelines were
(8) generally consistent with those set out in the Revised Framework for
the International Convergence of Capital Measurement and Capital
Standards issued by the Basel Committee on Banking Supervision
(Basel II). The firm’s risk-weighted assets under Basel II were
approximately $382 billion as of June 26, 2009. These ratios represent
preliminary estimates as of the date of this earnings release and may
be revised in the firm’s Quarterly Report on Form 10-Q for the fiscal
period ended June 26, 2009. For a further discussion of the firm's
capital requirements, 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 fiscal period ended March 27, 2009.
This amount represents a preliminary estimate as of the date of this
(9) earnings release and may be revised in the firm’s Quarterly Report on
Form 10-Q for the fiscal period ended June 26, 2009.
SFAS No. 157, “Fair Value Measurements,” establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to
measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or
liabilities (level 1 measurements) and the lowest priority to
unobservable inputs (level 3 measurements). Level 3 assets reflect
prices or valuations that require inputs that are both significant to
(10) the fair value measurement and unobservable. For a further discussion
of the firm's level 3 assets, see "Critical Accounting Policies – Fair
Value – Fair Value Hierarchy – Level 3” 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 fiscal
period ended March 27, 2009. This amount 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 fiscal period ended
June 26, 2009.
The firm’s global core excess represents a pool of excess liquidity
consisting of unencumbered, highly liquid securities that may be sold
or pledged to provide same-day liquidity, as well as overnight cash
deposits. This liquidity is intended to allow the firm to meet
immediate obligations without the need to sell other assets or depend
on additional funding from credit-sensitive markets in a difficult
funding environment. This amount represents the average loan value (the
estimated amount of cash that would be advanced by counterparties
(11) against these securities), as well as overnight cash deposits, of the
global core excess. For a further discussion of the firm's global core
excess liquidity pool, please see "Liquidity and Funding Risk" 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 fiscal period ended March 27, 2009. This amount
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 fiscal period ended June 26, 2009.
Beginning in the second quarter of 2009, “Amortization of identifiable
(12) intangible assets” is included in “Depreciation and amortization” in
the consolidated statements of earnings. Prior periods have been
reclassified to conform to the current presentation.
Basic earnings per common share for the three and six months ended
June 26, 2009 were computed in accordance with FASB Staff Position
(FSP) No. EITF 03-6-1, “Determining Whether Instruments Granted in
(13) Share-Based Payment Transactions Are Participating Securities,” and the
impact was a reduction of $0.02 per basic common share. There was no
impact from the adoption of FSP No. EITF 03-6-1 to earnings per basic
common share for the quarter ended March 27, 2009. Prior periods have
not been restated due to immateriality.
Includes employees, consultants and temporary staff. Excludes total
staff of approximately 3,900, 3,900 and 4,900 as of June 26, 2009,
March 27, 2009 and May 30, 2008, respectively, of consolidated entities
(14) held for investment purposes. Compensation and benefits includes $66
million, $70 million and $66 million for the three months ended
June 26, 2009, March 27, 2009 and May 30, 2008, respectively,
attributable to these consolidated entities.
VaR is the potential loss in value of the firm’s trading positions due
to adverse market movements over a one-day time horizon with a 95%
confidence level. The modeling of the risk characteristics of the
firm’s trading positions involves a number of assumptions and
approximations. While management believes that these assumptions and
(15) approximations are reasonable, there is no standard methodology for
estimating VaR, and different assumptions and/or approximations could
produce materially different VaR estimates. For a further discussion of
the calculation of VaR, see Part II, Item 7A "Quantitative and
Qualitative Disclosures About Market Risk" in the firm’s Annual Report
on Form 10-K for the fiscal year ended November 28, 2008.
Equals the difference between total VaR and the sum of the VaRs for the
(16) four risk categories. This effect arises because the four market risk
categories are not perfectly correlated.
Substantially all assets under management are valued as of calendar
(17) month-end. Assets under management do not include the firm’s
investments in funds that it manages.
(18) Represents investments included within the Principal Investments
component of the firm’s Trading and Principal Investments segment.
Includes interests of $3.96 billion as of June 26, 2009 held by
investment funds managed by the firm. The fair value of the investment
in the ordinary shares of ICBC, which trade on The Stock Exchange of
Hong Kong, includes the effect of foreign exchange revaluation for
(19) which the firm maintains an economic currency hedge. On April 28, 2009,
20% of the ICBC shares held by the firm became free from transfer
restrictions and the firm completed the disposition of these shares
during the quarter. The remaining ICBC shares held by the firm are
subject to transfer restrictions, which prohibit liquidation at any
time prior to April 28, 2010.
Excludes the firm’s investment in the convertible preferred stock of
(20) Sumitomo Mitsui Financial Group, Inc. The firm has hedged all of the
common stock underlying this investment.
Contact:
The Goldman Sachs Group, Inc.
Media Relations:
Lucas van Praag, 212-902-5400
Investor Relations:
Dane E. Holmes, 212-902-0300
Last Updated: July 14, 2009 08:15 EDT
