Fitch: Goldman Posts Solid Operating Performance
NEW YORK -- April 16, 2013
First quarter 2013 (1Q'13) operating results for The Goldman Sachs Group, Inc.
(Goldman) were generally in line with expectations: solid operating
profitability, conservative liquidity levels and continued growth in the Basel
III capital ratio. These latest results have no rating implications, according
to Fitch Ratings.
Revenues (excluding DVA) were essentially flat when compared to a strong 1Q'12
and 9% above the seasonally weaker 4Q'12 level. Operating profits improved
year-over-year, reflecting efforts to improve operating efficiency. Operating
expenses were well controlled, declining 1% year-over-year and improving as a
percentage of revenues.
Revenues benefited year-over-year from sharply higher investment banking
revenues. Equity and debt underwriting revenues improved in view of healthier
equity markets combined with low absolute interest rates and tight credit
spreads. Advisory revenues remained essentially flat and continue to be
affected by sluggish mergers and acquisitions activity (although there are
signs of a pick-up).
Goldman also posted higher revenues in both investment management and
investing and lending segments. Investing and lending revenues included net
gains in both equity and credit-related positions as well as net interest
income. The contribution from this area tends to be volatile from quarter to
quarter depending on moves in equity markets and credit spreads.
Institutional client services remained the largest contributor to revenues at
over 50% of total. In this segment, revenues were at a healthy level in tandem
with a favorable market environment. Revenues were up strongly from 4Q'12, but
moderately lower year-over-year. Revenues in 1Q'12, particularly in the rates
business, were boosted by a snap back in the European bond markets following
ECB actions. Trading VaR remains subdued reflecting benign market volatility
in recent periods.
Global core excess liquidity, including unencumbered, highly liquid securities
and cash, stood at a healthy $174 billion (18% of total assets) at year-end
and averaged $181 billion during the latest quarter. Liquidity has been
consistently maintained at these conservative levels in recent years. Fitch
believes Goldman will comfortably meet Basel III liquidity requirements.
Under Basel III, Goldman's Tier I common ratio was approximately 9%, compared
with approximately 8% a year ago. Management is targeting approximately a 1%
management buffer above Goldman's G-SIFI buffer of 1.5%. As expected, Basel I
capital ratios were negatively affected by the adoption of revised market risk
capital requirements. Nevertheless, capital ratios remain quite comfortable
under Basel I.
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Joseph Scott, +1-212-908-0624
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Nathan Flanders, +1-212-908-0827
Brian Bertsch, +1-212-908-0549
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