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Goldman Sachs Reports Second Quarter Earnings Per Common Share Of $3.70

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 1-800-585-8367 (U.S. domestic) or 1-404-537-3406 (international) passcode number 72746612, 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,  

2013 2013 2012 2013 2012
Investment Banking
Financial Advisory $ 486 $ 484 $ 469 - % 4 %
 
Equity underwriting 371 390 239 (5 ) 55
Debt underwriting   695     694     495   -   40  
Total Underwriting 1,066 1,084 734 (2 ) 45
               
Total Investment Banking   1,552     1,568     1,203   (1 ) 29  
 
Institutional Client Services

Fixed Income, Currency and Commodities Client Execution

2,463 3,217 2,194 (23 ) 12
 
Equities client execution (9) 638 809 510 (21 ) 25
Commissions and fees 836 793 776 5 8
Securities services   376     320     409   18   (8 )
Total Equities 1,850 1,922 1,695 (4 ) 9
               
Total Institutional Client Services   4,313     5,139     3,889   (16 ) 11  
 
Investing & Lending
Equity securities 462 1,127 (306 ) (59 ) N.M.
Debt securities and loans 658 566 222 16 196
Other 295 375 287 (21 ) 3
               
Total Investing & Lending   1,415     2,068     203   (32 ) N.M.  
 
Investment Management
Management and other fees 1,098 1,060 1,019 4 8
Incentive fees 118 140 217 (16 ) (46 )
Transaction revenues 116 115 96 1 21
               
Total Investment Management   1,332     1,315     1,332   1   -  
               
Total net revenues $ 8,612   $ 10,090   $ 6,627   (15 ) 30  
 
 
Six Months Ended

% Change

From

June 30,

June 30,

June 30,
2013 2012 2012
 
Investment Banking
Financial Advisory $ 970 $ 958 1 %
 
Equity underwriting 761 494 54
Debt underwriting   1,389     905     53  
Total Underwriting 2,150 1,399 54
         
Total Investment Banking   3,120     2,357     32  
 
Institutional Client Services

Fixed Income, Currency and Commodities Client Execution

5,680 5,652 -
 
Equities client execution (9) 1,447 1,560 (7 )
Commissions and fees 1,629 1,610 1
Securities services   696     776     (10 )
Total Equities 3,772 3,946 (4 )
         
Total Institutional Client Services   9,452     9,598     (2 )
 
Investing & Lending
Equity securities 1,589 754 111
Debt securities and loans 1,224 807 52
Other 670 553 21
         
Total Investing & Lending   3,483     2,114     65  
 
Investment Management
Management and other fees 2,158 2,022 7
Incentive fees 258 275 (6 )
Transaction revenues 231 210 10
         
Total Investment Management   2,647     2,507     6  
         
Total net revenues $ 18,702   $ 16,576     13  
 

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,  

2013 2013 2012 2013 2012
Revenues
Investment banking $ 1,552 $ 1,568 $ 1,206 (1 ) % 29 %
Investment management 1,267 1,250 1,266 1 -
Commissions and fees 873 829 799 5 9
Market making 2,692 3,437 2,097 (22 ) 28
Other principal transactions   1,402     2,081     169   (33 ) N.M.  
Total non-interest revenues 7,786 9,165 5,537 (15 ) 41
 
Interest income 2,663 2,608 3,055 2 (13 )
Interest expense   1,837     1,683     1,965   9   (7 )
Net interest income   826     925     1,090   (11 ) (24 )
 
Net revenues, including net interest income   8,612     10,090     6,627   (15 ) 30  
 
Operating expenses
Compensation and benefits 3,703 4,339 2,915 (15 ) 27
 

Brokerage, clearing, exchange and distribution fees

613 561 544 9 13
Market development 140 141 129 (1 ) 9
Communications and technology 182 188 202 (3 ) (10 )
Depreciation and amortization 266 302 409 (12 ) (35 )
Occupancy 210 218 214 (4 ) (2 )
Professional fees 218 246 213 (11 ) 2
Insurance reserves 49 127 121 (61 ) (60 )
Other expenses   586     595     465   (2 ) 26  
Total non-compensation expenses 2,264 2,378 2,297 (5 ) (1 )
                   
Total operating expenses   5,967     6,717     5,212   (11 ) 14  
 
Pre-tax earnings 2,645 3,373 1,415 (22 ) 87
Provision for taxes   714     1,113     453   (36 ) 58  
Net earnings 1,931 2,260 962 (15 ) 101
 
Preferred stock dividends   70     72     35   (3 ) 100  
Net earnings applicable to common shareholders $ 1,861   $ 2,188   $ 927   (15 ) 101  
 
 
Earnings per common share
Basic (14) $ 3.92 $ 4.53 $ 1.83 (13 ) % 114 %
Diluted 3.70 4.29 1.78 (14 ) 108
 
Average common shares outstanding
Basic 473.2 482.1 501.5 (2 ) (6 )
Diluted 503.5 509.8 520.3 (1 ) (3 )
 
Selected Data
Total staff at period-end (12) 31,700 32,000 32,300 (1 ) (2 )
 

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,  

2013 2012 2012
Revenues
Investment banking $ 3,120 $ 2,366 32 %
Investment management 2,517 2,371 6
Commissions and fees 1,702 1,659 3
Market making 6,129 6,002 2
Other principal transactions   3,483     2,107   65  
Total non-interest revenues 16,951 14,505 17
 
Interest income 5,271 5,888 (10 )
Interest expense   3,520     3,817   (8 )
Net interest income   1,751     2,071   (15 )
 
Net revenues, including net interest income   18,702     16,576   13  
 
Operating expenses
Compensation and benefits 8,042 7,293 10
 
Brokerage, clearing, exchange and distribution fees 1,174 1,111 6
Market development 281 246 14
Communications and technology 370 398 (7 )
Depreciation and amortization 568 842 (33 )
Occupancy 428 426 -
Professional fees 464 447 4
Insurance reserves 176 278 (37 )
Other expenses   1,181     939   26  
Total non-compensation expenses 4,642 4,687 (1 )
         
Total operating expenses   12,684     11,980   6  
 
Pre-tax earnings 6,018 4,596 31
Provision for taxes   1,827     1,525   20  
Net earnings 4,191 3,071 36
 
Preferred stock dividends   142     70   103  
Net earnings applicable to common shareholders $ 4,049   $ 3,001   35  
 
 
Earnings per common share
Basic (14) $ 8.45 $ 5.90 43 %
Diluted 7.99 5.72 40
 
Average common shares outstanding
Basic 477.5 506.1 (6 )
Diluted 506.6 524.7 (3 )
 

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES SELECTED FINANCIAL DATA (UNAUDITED)

Average Daily VaR (15)
$ in millions
               
Three Months Ended

  June 30,  

 March 31, 

  June 30,  

2013 2013 2012
Risk Categories
Interest rates $ 59 $ 62 $ 83
Equity prices 30 30 23
Currency rates 23 14 16
Commodity prices 19 21 20
Diversification effect (15)  

(50

)

 

(51

)

 

(50

)

Total $ 81   $ 76   $ 92  
 
Assets Under Supervision (10)
$ in billions
 
As of % Change From

June 30,

March 31,

June 30,

 March 31, 

  June 30,  

2013 2013 2012 2013 2012
 
Assets under management $ 849 $ 860 $ 836

(1

)

% 2 %
Other client assets   106     108     80  

(2

)

33  
Assets under supervision (AUS) $ 955   $ 968   $ 916  

(1

)

4  
 
Asset Class
Alternative investments $ 143 $ 146 $ 144

(2

)

%

(1

)

%
Equity 173 171 149 1 16
Fixed income   412     415     387  

(1

)

6  
Long-term AUS (10) 728 732 680

(1

)

7
 
Liquidity products (10)   227     236     236  

(4

)

(4

)

Total AUS $ 955   $ 968   $ 916  

(1

)

4  
 
 
Three Months Ended

June 30,

March 31,

June 30,

2013 2013 2012
 
Balance, beginning of period $ 968 $ 965 $ 900
 
Net inflows / (outflows)
Alternative investments

(4

)

(5

)

(1

)

Equity 1 4

(2

)

Fixed income   10   (11)   6     17   (16)
Long-term AUS net inflows / (outflows) 7 5 14
 
Liquidity products  

(9

)

 

(14

)

  7  
Total AUS net inflows / (outflows)

(2

)

(9

)

21
 
Net market appreciation / (depreciation)

(11

)

12

(5

)

           
Balance, end of period $ 955   $ 968   $ 916  
 

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, 2013     June 30, 2013
Total shareholders' equity $ 77,629

$

77,156
Preferred stock                                                                     (6,950 )  

 

  (6,629 )
Common shareholders’ equity                                                                   $ 70,679      

$

70,527  
 

 (2)

  Thomson Reuters – January 1, 2013 through June 30, 2013.
 

 (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, 2013    

Total shareholders' equity $ 78,043
Preferred stock                                                                                           (7,200 )
Common shareholders’ equity 70,843
Goodwill and identifiable intangible assets                                                                                           (4,494 )
Tangible common shareholders’ equity                                                                                         $ 66,349  
 

 (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 March 31, 2013.

 

 (5)

Represents a preliminary estimate and may be revised in the firm’s Quarterly Report on Form 10-Q for the period ended June 30, 2013.

 

 (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 risk-based capital requirements were approximately $457 billion as of June 30, 2013, under Basel 1 and reflecting the revised market risk regulatory capital requirements which became effective on January 1, 2013. 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 March 31, 2013.

 

 (7)

The Tier 1 common ratio equals Tier 1 common capital divided by risk-weighted assets. As of June 30, 2013, Tier 1 common capital was $61.90 billion, consisting of Tier 1 capital of $71.14 billion less preferred stock, junior subordinated debt issued to trusts and other adjustments of $9.24 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 March 31, 2013.

 

 (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)

During the quarter, the firm completed the sale of a majority stake in its reinsurance business and no longer consolidates this business. Net revenues related to reinsurance were $84 million, $233 million and $259 million for the three months ended June 30, 2013, March 31, 2013 and June 30, 2012, respectively, and $317 million and $470 million for the six months ended June 30, 2013 and June 30, 2012, respectively.

 
(10) Assets under supervision (AUS) include assets under management and other client assets. Assets under management include client assets where the firm earns a fee for managing assets on a discretionary basis. Other client assets include client assets invested with third party managers, private bank deposits and advisory relationships where the firm earns a fee for advisory and other services, but does not have investment discretion. Long-term AUS represents AUS excluding liquidity products. Liquidity products represents money markets and bank deposit assets.
 
(11)

During the quarter, the firm completed the sale of a majority stake in its reinsurance business and no longer consolidates this business. Fixed income flows for the three months ended June 30, 2013 include $10 billion in assets managed by the firm related to this business. These assets were previously excluded from AUS as they were assets of a consolidated subsidiary.

 
(12) Includes employees, consultants and temporary staff.
 
(13)

The remaining 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 March 31, 2013, share repurchases require approval by the Board of Governors of the Federal Reserve System.

 
(14)

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 $0.01, $0.01 and $0.02 for the three months ended June 30, 2013, March 31, 2013 and June 30, 2012, respectively, and $0.03 for both the six months ended June 30, 2013 and June 30, 2012, respectively.

 
(15)

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 March 31, 2013.

 
(16)

Includes $34 billion of fixed income asset inflows in connection with the firm’s acquisition of Dwight Asset Management Company LLC.

 




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