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Goldman Sachs Reports Second Quarter Earnings Per Common Share Of $1.78

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, 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 30,  
     

 March 31, 
     

  June 30,  

 March 31, 
 

  June 30,  
2012 2012 2011 2012 2011
Investment Banking
Financial Advisory $ 469 $ 489 $ 637 (4 ) % (26 ) %
 
Equity underwriting 239 255 378 (6 ) (37 )
Debt underwriting   495     410     433   21   14  
Total Underwriting 734 665 811 10 (9 )
                 
Total Investment Banking   1,203     1,154     1,448   4   (17 )
 
Institutional Client Services
Fixed Income, Currency and Commodities Client Execution 2,194 3,458 1,599 (37 ) 37
 
Equities client execution 510 1,050 623 (51 ) (18 )
Commissions and fees 776 834 861 (7 ) (10 )
Securities services   409     367     432   11   (5 )
Total Equities 1,695 2,251 1,916 (25 ) (12 )
                 
Total Institutional Client Services   3,889     5,709     3,515   (32 ) 11  
 
Investing & Lending
ICBC (194 ) 169 (176 ) N.M. N.M.
Equity securities (excluding ICBC) (112 ) 891 686 N.M. N.M.
Debt securities and loans 222 585 200 (62 ) 11
Other 287 266 334 8 (14 )
                 
Total Investing & Lending   203     1,911     1,044   (89 ) (81 )
 
Investment Management
Management and other fees 1,019 1,003 1,080 2 (6 )
Incentive fees 217 58 63 N.M. N.M.
Transaction revenues 96 114 131 (16 ) (27 )
                 
Total Investment Management   1,332     1,175     1,274   13   5  
                 
Total net revenues $ 6,627   $ 9,949   $ 7,281   (33 ) (9 )
 
 
Six Months Ended

% Change

From

  June 30,  

  June 30,  

  June 30,  
2012 2011 2011
Investment Banking
Financial Advisory $ 958 $ 994 (4 ) %
 
Equity underwriting 494 804 (39 )
Debt underwriting   905     919     (2 )
Total Underwriting 1,399 1,723 (19 )
         
Total Investment Banking   2,357     2,717     (13 )
 
Institutional Client Services
Fixed Income, Currency and Commodities Client Execution 5,652 5,924 (5 )
 
Equities client execution 1,560 1,602 (3 )
Commissions and fees 1,610 1,832 (12 )
Securities services   776     804     (3 )
Total Equities 3,946 4,238 (7 )
         
Total Institutional Client Services   9,598     10,162     (6 )
 
Investing & Lending
ICBC (25 ) 140 N.M.
Equity securities (excluding ICBC) 779 1,740 (55 )
Debt securities and loans 807 1,224 (34 )
Other 553 645 (14 )
         
Total Investing & Lending   2,114     3,749     (44 )
 
Investment Management
Management and other fees 2,022 2,128 (5 )
Incentive fees 275 137 101
Transaction revenues 210 282 (26 )
         
Total Investment Management   2,507     2,547     (2 )
         
Total net revenues $ 16,576   $ 19,175     (14 )
 

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 30,  
     

 March 31, 
     

  June 30,  

 March 31, 
 

  June 30,  
2012 2012 2011 2012 2011
Revenues
Investment banking $ 1,206 $ 1,160 $ 1,448 4 % (17 ) %
Investment management 1,266 1,105 1,188 15 7
Commissions and fees 799 860 894 (7 ) (11 )
Market making 2,097 3,905 1,736 (46 ) 21
Other principal transactions   169     1,938     602   (91 ) (72 )
Total non-interest revenues 5,537 8,968 5,868 (38 ) (6 )
 
Interest income 3,055 2,833 3,681 8 (17 )
Interest expense   1,965     1,852     2,268   6   (13 )
Net interest income   1,090     981     1,413   11   (23 )
 
Net revenues, including net interest income   6,627     9,949     7,281   (33 ) (9 )
 
Operating expenses
Compensation and benefits 2,915 4,378 3,204 (33 ) (9 )
 
Brokerage, clearing, exchange and distribution fees 544 567 615 (4 ) (12 )
Market development 129 117 183 10 (30 )
Communications and technology 202 196 210 3 (4 )
Depreciation and amortization 409 433 372 (6 ) 10
Occupancy 214 212 252 1 (15 )
Professional fees 213 234 263 (9 ) (19 )
Insurance reserves 121 157 117 (23 ) 3
Other expenses   465     474     453   (2 ) 3  
Total non-compensation expenses 2,297 2,390 2,465 (4 ) (7 )
             
Total operating expenses   5,212     6,768     5,669   (23 ) (8 )
 
Pre-tax earnings 1,415 3,181 1,612 (56 ) (12 )
Provision for taxes   453     1,072     525   (58 ) (14 )
Net earnings 962 2,109 1,087 (54 ) (11 )
 
Preferred stock dividends   35     35     35   -   -  
Net earnings applicable to common shareholders $ 927   $ 2,074   $ 1,052   (55 ) (12 )
 
 
Earnings per common share
Basic (11) $ 1.83 $ 4.05 $ 1.96 (55 ) % (7 ) %
Diluted 1.78 3.92 1.85 (55 ) (4 )
 
Average common shares outstanding
Basic 501.5 510.8 531.9 (2 ) (6 )
Diluted 520.3 529.2 569.5 (2 ) (9 )
 
Selected Data

Total staff at period-end  (12)
32,300 32,400 35,500 - (9 )
 

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) In millions, except per share amounts
      Six Months Ended      

% Change

From

  June 30,  
     

  June 30,  

  June 30,  
2012 2011 2011
Revenues
Investment banking $ 2,366 $ 2,717 (13 ) %
Investment management 2,371 2,362 -
Commissions and fees 1,659 1,913 (13 )
Market making 6,002 6,198 (3 )
Other principal transactions   2,107     3,214   (34 )
Total non-interest revenues 14,505 16,404 (12 )
 
Interest income 5,888 6,788 (13 )
Interest expense   3,817     4,017   (5 )
Net interest income   2,071     2,771   (25 )
 
Net revenues, including net interest income   16,576     19,175   (14 )
 
Operating expenses
Compensation and benefits 7,293 8,437 (14 )
 
Brokerage, clearing, exchange and distribution fees 1,111 1,235 (10 )
Market development 246 362 (32 )
Communications and technology 398 408 (2 )
Depreciation and amortization 842 962 (12 )
Occupancy 426 519 (18 )
Professional fees 447 496 (10 )
Insurance reserves 278 205 36
Other expenses   939     899   4  
Total non-compensation expenses 4,687 5,086 (8 )
         
Total operating expenses   11,980     13,523   (11 )
 
Pre-tax earnings 4,596 5,652 (19 )
Provision for taxes   1,525     1,830   (17 )
Net earnings 3,071 3,822 (20 )
 
Preferred stock dividends   70     1,862   (96 )
Net earnings applicable to common shareholders $ 3,001   $ 1,960   53  
 
 
Earnings per common share
Basic (11) $ 5.90 $ 3.62 63 %
Diluted 5.72 3.40 68
 
Average common shares outstanding
Basic 506.1 536.2 (6 )
Diluted 524.7 576.4 (9 )
 

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA (UNAUDITED)
Average Daily VaR (13)
$ in millions
                             
Three Months Ended

  June 30,  

 March 31, 

  June 30,  
2012 2012 2011
Risk Categories
Interest rates $ 83 $ 90 $ 76
Equity prices 23 29 35
Currency rates 16 15 21
Commodity prices 20 26 39
Diversification effect (13)   (50 )   (65 )   (70 )
Total $ 92   $ 95   $ 101  
 
 
Assets Under Management (14)
$ in billions
 
As of % Change From

  June 30,  

 March 31, 

  June 30,  

 March 31, 

  June 30,  
2012 2012 2011 2012 2011
Asset Class
Alternative investments $ 137 $ 139 $ 148 (1 ) % (7 ) %
Equity 127 136 148 (7 ) (14 )
Fixed income   363     347     352   5   3  
Total non-money market assets 627 622 648 1 (3 )
 
Money markets   209     202     196   3   7  
Total assets under management $ 836   $ 824   $ 844   1   (1 )
 
 
Three Months Ended

  June 30,  

 March 31, 

  June 30,  
2012 2012 2011
 
Balance, beginning of period $ 824 $ 828 $ 840
 
Net inflows / (outflows)
Alternative investments (1 ) (4 ) (3 )
Equity (2 ) (5 ) (2 )
Fixed income   12     1     7  
Total non-money market net inflows / (outflows) 9 (8 ) 2
 
Money markets   7     (18 )   (5 )
Total net inflows / (outflows) 16

(8)
(26 ) (3 )
 
Net market appreciation / (depreciation) (4 ) 22 7
     
Balance, end of period $ 836   $ 824   $ 844  
 

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:
 
                                                                                            Average for the
Three Months Ended     Six Months Ended

Unaudited, in millions
                                                                                   

        June 30, 2012        
   

        June 30, 2012        
Total shareholders' equity

$

71,637

$

71,170
Preferred stock                                                                                       (3,538 )       (3,350 )

Common shareholders' equity
                                                                                   

$

68,099
     

$

67,820
 
 
(2)  

Thomson Reuters – January 1, 2012 through June 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:
 
                                                                                                                        As of

Unaudited, in millions
                                                                                                               

        June 30, 2012        
Total shareholders' equity

$

72,855
Preferred stock                                                                                                                   (4,850 )

Common shareholders' equity

68,005

Goodwill and identifiable intangible assets
                                                                                                                  (5,400 )

Tangible common shareholders' equity
                                                                                                               

$

62,605
 
 
(4)

The firm’s global core excess represents a pool of excess liquidity consisting of unencumbered, highly liquid securities and cash. These amounts 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 period ended June 30, 2012 (June 30, 2012 Form 10-Q). 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 March 31, 2012 (March 31, 2012 Form 10-Q).
 
(5)

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 capital adequacy regulations currently applicable to bank holding companies (Basel 1) were approximately $429 billion as of June 30, 2012. This ratio represents a preliminary estimate as of the date of this earnings release and may be revised in the firm’s June 30, 2012 Form 10-Q. 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 March 31, 2012 Form 10-Q.
 
(6)

The Tier 1 common ratio equals Tier 1 common capital divided by risk-weighted assets. As of June 30, 2012, Tier 1 common capital was $56.34 billion, consisting of Tier 1 capital of $64.44 billion less preferred stock of $4.85 billion and junior subordinated debt issued to trusts of $3.25 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. This ratio represents a preliminary estimate as of the date of this earnings release and may be revised in the firm’s June 30, 2012 Form 10-Q. 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 March 31, 2012 Form 10-Q.
 
(7) 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.
 
(8)

Includes $17 billion of fixed income asset inflows in connection with the firm’s acquisition of Dwight Asset Management Company LLC.
 
(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 March 31, 2012 Form 10-Q, share repurchases require approval by the Board of Governors of the Federal Reserve System.
 
(10)

This amount represents a preliminary estimate as of the date of this earnings release and may be revised in the firm’s June 30, 2012 Form 10-Q.
 
(11)

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, $0.01 and $0.02 for the three months ended June 30, 2012, March 31, 2012 and June 30, 2011, respectively, and $0.03 and $0.04 for the six months ended June 30, 2012 and June 30, 2011, respectively.
 
(12) Includes employees, consultants and temporary staff.
 
(13)

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 March 31, 2012 Form 10-Q.
 
(14) Assets under management include client assets where the firm earns a fee for managing assets on a discretionary basis.
 

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