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For a discussion of some of the risks and factors that could affect the firm's future results, please see the description of risk factors in our current annual report on Form 10-K for the fiscal year ended December 2010.I would also direct you to read the forward-looking disclaimers in our quarterly earnings release, particularly as it relates to our Investment Banking transaction backlog, capital ratios, risk-weighted assets and global core excess. And you should also read the information on the calculation of non-GAAP financial measures that is posted on the Investor Relations portion of our website at www.gs.com. This audiocast is copyrighted material of The Goldman Sachs Group, Inc., and may not be duplicated, reproduced or rebroadcast without our consent. Our Chief Financial Officer, David Viniar, will now review the firm's results. David? David A. Viniar Thanks, Dane. I'd like to thank all of you for listening today. I'll give an overview of our third quarter results and then take your questions. Net revenues in the third quarter were $3.6 billion. Net earnings were a negative $393 million, and earnings per diluted share were negative $0.84. The third quarter continued to be dominated by concerns surrounding the weakened state of the global economy. The market was particularly focused on sovereign risk within the Eurozone, specifically the risk of contagion from smaller GDP countries like Greece to larger GDP countries. Market participants are also focused on how heightened sovereign risk will impact the banking system within the Eurozone and beyond. The uncertainty surrounding the potential policy responses to these complex issues have amplified the level of concern among market participants. The price performance within European markets was a strong indicator of market fears, with the EURO STOXX 50 down 23% during the third quarter. As would be expected, the Eurozone concerned heightened worries regarding the implications of these challenges on economic prospects in the U.S. Similar to Europe, equity and debt markets reflected increased fears about the U.S. economic outlook. The S&P 500 declined 14% and the VIX increased to its highest level in more than 2 years. Ultimately, economic concerns within Europe and the U.S. permeated investor sentiment within growth markets as demonstrated by Hang Seng, Bovespa and Shanghai composites, posting quarterly declines of 21%, 16% and 15%, respectively.
Faced with a challenging global economic outlook, CEO confidence and investor sentiment remained under pressure. Whether it was a volatile and unpredictable market that made new equity issuances very difficult to execute, our asset management clients having much less conviction on investment decisions, the broader environment served as a significant headwind to clients moving forward with their business objectives.As we've said in the past, the firm's opportunity set begins with the client decision to transact, a decision which has historically been correlated to a growing economic environment. A growing economy is also correlated to increasing asset values and positive revenues from our Investing & Lending activities. Not surprisingly, the macro challenges in the quarter drove lower levels of client activity in Investment Banking and certain FICC businesses and a significant decline in asset values within our Investing & Lending portfolio, resulting in a third quarter loss. Despite the negative revenues in our Investing & Lending business this quarter, we have a strong track records in investor and our position to product of long-term investment decisions. We entered into these positions with a focus on meeting our client's needs for financing, supporting key strategic relationships and generating long-term returns for our clients and shareholders. The firm also has a full understanding of the fair value implications of these investment decisions, and our third quarter results reflect falling asset prices and are unrealized. Given the significance in complexity of the economic issues facing governments and regulators, we are, of course, cautious about the near-term outlook for our business. And while we are clearly disappointed about our third quarter results, we remain optimistic about the medium- and long-term outlook for Goldman Sachs. Our global clients continue to play significant value on our services, whether acting as a merger advisor or as a financial intermediary. We will continue to focus on serving our clients' needs and managing shareholders' capital prudently, a commitment which we believe is central to our long-term value proposition. Read the rest of this transcript for free on seekingalpha.com