EX-99.1 2 d466260dex991.htm PRESS RELEASE Press release

Exhibit 99.1

The Goldman Sachs Group, Inc.  |  200 West Street  |  New York, New York 10282

 

GOLDMAN SACHS REPORTS

EARNINGS PER COMMON SHARE OF $14.13 FOR 2012

 

FOURTH QUARTER EARNINGS PER COMMON SHARE WERE $5.60

     LOGO     

NEW YORK, January 16, 2013 — The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of $34.16 billion and net earnings of $7.48 billion for the year ended December 31, 2012. Diluted earnings per common share were $14.13 compared with $4.51 for the year ended December 31, 2011. Return on average common shareholders’ equity (ROE) (1) was 10.7% for 2012.

Fourth quarter net revenues were $9.24 billion and net earnings were $2.89 billion. Diluted earnings per common share were $5.60 compared with $1.84 for the fourth quarter of 2011 and $2.85 for the third quarter of 2012. Annualized ROE (1) was 16.5% for the fourth quarter of 2012.

Annual Highlights

 

 

Goldman Sachs continued its leadership in investment banking, ranking first in worldwide announced and completed mergers and acquisitions for the year. (2)

 

 

The firm ranked first in worldwide equity and equity-related offerings and common stock offerings for the year. (2)

 

 

Debt underwriting produced net revenues of $1.96 billion, which is the second best annual performance and the highest since 2007.

 

 

Fixed Income, Currency and Commodities Client Execution generated net revenues of $9.91 billion, including strong results in mortgages and solid results in credit products and interest rate products.

 

 

Book value per common share increased approximately 11% to $144.67 and tangible book value per common share (3) increased approximately 12% to $134.06 compared with the end of 2011.

 

 

The firm continues to manage its liquidity and capital conservatively. The firm’s global core excess liquidity (4) was $175 billion (5) as of December 31, 2012. In addition, the firm’s Tier 1 capital ratio under Basel 1 (6) was 16.7% (5) and the firm’s Tier 1 common ratio under Basel 1 (7) was 14.5% (5) as of December 31, 2012.

 

 

“While economic conditions remained challenging for much of last year, the strengths of our business model and client franchise, coupled with our focus on disciplined management, delivered solid performance for our shareholders,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “The firm’s strategic position provides a solid basis on which to grow and generate superior returns.”

 

 

Media Relations:  Jake Siewert  212-902-5400

  |     Investor Relations:  Dane E. Holmes  212-902-0300   


Net Revenues

Investment Banking

Full Year

Net revenues in Investment Banking were $4.93 billion for 2012, 13% higher than 2011. Net revenues in Financial Advisory were $1.98 billion, essentially unchanged compared with 2011. Net revenues in the firm’s Underwriting business were $2.95 billion, 25% higher than 2011, due to strong net revenues in debt underwriting. Net revenues in debt underwriting were significantly higher compared with 2011, primarily reflecting higher net revenues from investment-grade and leveraged finance activity. Net revenues in equity underwriting were lower compared with 2011, primarily reflecting a decline in industry-wide initial public offerings.

Fourth Quarter

Net revenues in Investment Banking were $1.41 billion for the fourth quarter of 2012, 64% higher than the fourth quarter of 2011 and 21% higher than the third quarter of 2012. Net revenues in Financial Advisory were $508 million, 8% higher than the fourth quarter of 2011, primarily reflecting an increase in industry-wide completed mergers and acquisitions. Net revenues in the firm’s Underwriting business were $897 million, more than double the amount in the fourth quarter of 2011. Net revenues in both debt underwriting and equity underwriting were significantly higher compared with the fourth quarter of 2011, primarily reflecting an increase in industry-wide activity.

The firm’s investment banking transaction backlog increased compared with both the end of the third quarter of 2012 and the end of 2011. (8)

Institutional Client Services

Full Year

Net revenues in Institutional Client Services were $18.12 billion for 2012, 5% higher than 2011.

Net revenues in Fixed Income, Currency and Commodities Client Execution were $9.91 billion for 2012, 10% higher than 2011. These results reflected strong net revenues in mortgages, which were significantly higher compared with 2011. In addition, net revenues in credit products and interest rate products were solid and higher compared with 2011. These increases were partially offset by significantly lower net revenues in commodities and slightly lower net revenues in currencies. Although broad market concerns persisted during 2012, Fixed Income, Currency and Commodities Client Execution operated in a generally improved environment characterized by tighter credit spreads and less challenging market-making conditions compared with 2011.

Net revenues in Equities were $8.21 billion for 2012, essentially unchanged compared with 2011. Net revenues in securities services were significantly higher compared with 2011, reflecting a gain of approximately $500 million on the sale of the firm’s hedge fund administration business. In addition, equities client execution net revenues were higher than 2011, primarily reflecting significantly higher results in cash products, principally due to increased levels of client activity. These increases were partially offset by lower commissions and fees, reflecting lower market volumes. During 2012, Equities operated in an environment generally characterized by an increase in global equity prices and lower volatility levels.

 

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The net loss attributable to the impact of changes in the firm’s own credit spreads on borrowings for which the fair value option was elected was $714 million ($433 million and $281 million related to Fixed Income, Currency and Commodities Client Execution and equities client execution, respectively) for 2012, compared with a net gain of $596 million ($399 million and $197 million related to Fixed Income, Currency and Commodities Client Execution and equities client execution, respectively) for 2011.

Fourth Quarter

Net revenues in Institutional Client Services were $4.34 billion for the fourth quarter of 2012, 42% higher than the fourth quarter of 2011 and 4% higher than the third quarter of 2012.

Net revenues in Fixed Income, Currency and Commodities Client Execution were $2.04 billion for the fourth quarter of 2012, 50% higher than the fourth quarter of 2011, reflecting significantly higher net revenues in credit products and mortgages compared with difficult market-making conditions during the fourth quarter of 2011, and higher net revenues in currencies. These increases were partially offset by significantly lower net revenues in commodities and lower net revenues in interest rate products. During the fourth quarter of 2012, Fixed Income, Currency and Commodities Client Execution operated in an environment characterized by generally tighter credit spreads and improved activity levels in credit products and mortgages compared with the fourth quarter of 2011.

Net revenues in Equities were $2.30 billion for the fourth quarter of 2012, 36% higher than the fourth quarter of 2011, reflecting significantly higher net revenues in securities services and equities client execution. The increase in securities services net revenues compared with the fourth quarter of 2011 reflected a gain of approximately $500 million on the sale of the firm’s hedge fund administration business. The increase in equities client execution net revenues compared with the fourth quarter of 2011 reflected significantly higher net revenues in derivatives and higher net revenues in reinsurance. These increases were partially offset by lower commissions and fees, reflecting lower market volumes. During the quarter, Equities operated in an environment generally characterized by low volatility levels and an increase in equity prices in Asia and Europe.

The net loss attributable to the impact of changes in the firm’s own credit spreads on borrowings for which the fair value option was elected was $126 million ($79 million and $47 million related to Fixed Income, Currency and Commodities Client Execution and equities client execution, respectively) for the fourth quarter of 2012. The net gain attributable to the impact of changes in the firm’s own credit spreads on borrowings for which the fair value option was elected was $20 million (all related to equities client execution) for the fourth quarter of 2011.

 

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Investing & Lending

Full Year

Net revenues in Investing & Lending were $5.89 billion for 2012. Investing & Lending net revenues were positively impacted by tighter credit spreads and an increase in global equity prices. Results for 2012 included a gain of $408 million from the firm’s investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC), net gains of $2.39 billion from other investments in equities, primarily in private equities, net gains and net interest income of $1.85 billion from debt securities and loans, and other net revenues of $1.24 billion, principally related to the firm’s consolidated investment entities.

Fourth Quarter

Net revenues in Investing & Lending were $1.97 billion for the fourth quarter of 2012. Investing & Lending net revenues were positively impacted by generally tighter credit spreads and an increase in equity prices in Asia and Europe. Results for the fourth quarter of 2012 included a gain of $334 million from the firm’s investment in the ordinary shares of ICBC, net gains of $789 million from other investments in equities, primarily in private equities, net gains and net interest income of $485 million from debt securities and loans, and other net revenues of $365 million, principally related to the firm’s consolidated investment entities.

Investment Management

Full Year

Net revenues in Investment Management were $5.22 billion for 2012, 4% higher than 2011, due to significantly higher incentive fees, partially offset by lower transaction revenues and slightly lower management and other fees. During the year, assets under supervision (9) increased $70 billion to $965 billion. Assets under management increased $26 billion to $854 billion, reflecting net market appreciation of $44 billion, primarily in fixed income and equity assets, partially offset by net outflows of $18 billion. Net outflows included outflows in equity, alternative investment and money market assets, partially offset by inflows in fixed income assets (10). Other client assets increased $44 billion to $111 billion, primarily due to net inflows (10).

Fourth Quarter

Net revenues in Investment Management were $1.52 billion for the fourth quarter of 2012, 20% higher than the fourth quarter of 2011 and 26% higher than the third quarter of 2012. The increase in net revenues compared with the fourth quarter of 2011 was primarily due to significantly higher incentive fees and higher management and other fees. During the quarter, assets under supervision increased $14 billion to $965 billion. Assets under management decreased $2 billion to $854 billion, reflecting net outflows of $7 billion (10), partially offset by net market appreciation of $5 billion. Net outflows included outflows in fixed income, equity and alternative investment assets, partially offset by inflows in money market assets. Other client assets increased $16 billion to $111 billion, primarily due to net inflows.

 

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Expenses

Operating expenses were $22.96 billion for 2012, essentially unchanged compared with 2011.

Compensation and Benefits

Compensation and benefits expenses (including salaries, discretionary compensation, amortization of equity awards and other items such as benefits) were $12.94 billion for 2012, 6% higher than 2011. The ratio of compensation and benefits to net revenues for 2012 was 37.9% compared with 42.4% for 2011. Total staff (11) decreased 3% compared with the end of 2011.

Non-Compensation Expenses

Full Year

Non-compensation expenses were $10.01 billion for 2012, 4% lower than 2011. The decrease compared with 2011 primarily reflected the impact of expense reduction initiatives, lower brokerage, clearing, exchange and distribution fees, lower occupancy expenses and lower impairment charges. These decreases were partially offset by higher other expenses and increased reserves related to the firm’s reinsurance business. The increase in other expenses compared with 2011 primarily reflected higher net provisions for litigation and regulatory proceedings and higher charitable contributions.

Fourth Quarter

Non-compensation expenses were $2.95 billion for the fourth quarter of 2012, 14% higher than the fourth quarter of 2011 and 24% higher than the third quarter of 2012. The increase compared with the fourth quarter of 2011 was due to higher other expenses. The increase in other expenses primarily reflected higher net provisions for litigation and regulatory proceedings and higher charitable contributions.

The fourth quarter of 2012 included $260 million of net provisions for litigation and regulatory proceedings (including the settlement with the Federal Reserve Board regarding the independent foreclosure review) and $157 million of charitable contributions to Goldman Sachs Gives. The fourth quarter of 2011 included $47 million of net provisions for litigation and regulatory proceedings and $78 million of charitable contributions to Goldman Sachs Gives. Compensation was reduced in both 2012 and 2011 to fund the charitable contribution to Goldman Sachs Gives.

Provision for Taxes

The effective income tax rate for 2012 was 33.3%, essentially unchanged from 33.5% for the first nine months of 2012 and up from 28.0% for 2011. The increase from 28.0% to 33.3% was primarily due to the earnings mix and a decrease in the impact of permanent benefits.

 

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Capital

As of December 31, 2012, total capital was $243.02 billion, consisting of $75.72 billion in total shareholders’ equity (common shareholders’ equity of $69.52 billion and preferred stock of $6.20 billion) and $167.30 billion in unsecured long-term borrowings. Book value per common share was $144.67, an increase of approximately 11% compared with the end of 2011 and approximately 3% compared with the end of the third quarter of 2012. Tangible book value per common share (3) was $134.06, an increase of approximately 12% compared with the end of 2011 and approximately 3% compared with the end of the third quarter of 2012. 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 480.5 million as of December 31, 2012.

On October 24, 2012, The Goldman Sachs Group, Inc. (Group Inc.) issued 34,000 shares of perpetual 5.95% Non-Cumulative Preferred Stock, Series I (Series I Preferred Stock), for aggregate proceeds of $850 million.

During the year, the firm repurchased 42.0 million shares of its common stock at an average cost per share of $110.31, for a total cost of $4.64 billion, including 12.7 million shares during the fourth quarter at an average cost per share of $120.11, for a total cost of $1.53 billion. The remaining share authorization under the firm’s existing repurchase program is 21.5 million shares. (12)

Under the regulatory capital requirements currently applicable to bank holding companies (Basel 1), the firm’s Tier 1 capital ratio (6) was 16.7% (5) and the firm’s Tier 1 common ratio (7) was 14.5% (5) as of December 31, 2012, up from 15.0% and 13.1%, respectively, compared with September 30, 2012.

Other Balance Sheet and Liquidity Metrics

 

 

The firm’s global core excess liquidity (GCE) (4) was $175 billion (5) as of December 31, 2012 and averaged $173 billion (5) for the fourth quarter of 2012, compared with an average of $175 billion for the third quarter of 2012. GCE averaged $172 billion (5) for 2012, compared with an average of $166 billion for 2011.

 

 

Total assets were $939 billion (5) as of December 31, 2012, compared with $949 billion as of September 30, 2012 and $923 billion as of December 31, 2011.

 

 

Level 3 assets were $47 billion (5) as of December 31, 2012, compared with $48 billion for both September 30, 2012 and December 31, 2011, and represented 5.0% of total assets.

Dividends

Group, Inc. declared a dividend of $0.50 per common share to be paid on March 28, 2013 to common shareholders of record on February 28, 2013. The firm also declared dividends of $234.38, $387.50, $250.00, $250.00 and $437.99 per share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series I Preferred Stock, respectively (represented by depositary shares, each representing a 1/1,000th interest in a share of preferred stock), to be paid on February 11, 2013 to preferred shareholders of record on January 27, 2013. In addition, the firm declared dividends of $977.78 per each share of Series E Preferred Stock and Series F Preferred Stock, to be paid on March 1, 2013 to preferred shareholders of record on February 14, 2013.

 

 

 

 

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The Goldman Sachs Group, Inc. is a leading global investment banking, securities and investment management firm that provides a wide range of financial 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 all 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 U.S. Private Securities Litigation Reform Act of 1995. Forward-looking 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 year ended December 31, 2011.

Certain of the information regarding the firm’s capital ratios, risk-weighted assets, total assets, level 3 assets and 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 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 year ended December 31, 2011.

Conference Call

A conference call to discuss the firm’s results, outlook and related matters will be held at 10:30 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 75327207, 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.

 

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THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

SEGMENT NET REVENUES

(UNAUDITED)

$ in millions

 

    Year Ended                   % Change From  
       December 31,   
2012
          December 31,   
2011
                  December 31,
2011
 

Investment Banking

                  

Financial Advisory

  $ 1,975         $ 1,987                   (1)
                  

Equity underwriting

    987           1,085                   (9)   

Debt underwriting

    1,964           1,283                   53    
 

 

 

      

 

 

             

 

 

 

Total Underwriting

    2,951           2,368                   25    
                  
 

 

 

      

 

 

             

 

 

 

Total Investment Banking

    4,926           4,355                   13    
 

 

 

      

 

 

             

 

 

 
                  

Institutional Client Services

                  

Fixed Income, Currency and Commodities Client Execution

    9,914           9,018                   10    
                  

Equities client execution (13)

    3,171           3,031                     

Commissions and fees

    3,053           3,633                   (16)   

Securities services

    1,986           1,598                   24    
 

 

 

      

 

 

             

 

 

 

Total Equities

    8,210           8,262                   (1)   
                  
 

 

 

      

 

 

             

 

 

 

Total Institutional Client Services

    18,124           17,280                     
 

 

 

      

 

 

             

 

 

 
                  

Investing & Lending

                  

ICBC

    408           (517)                  N.M.   

Equity securities (excluding ICBC)

    2,392           1,120                   114    

Debt securities and loans

    1,850           96                   N.M.   

Other

    1,241           1,443                   (14)   
                  
 

 

 

      

 

 

             

 

 

 

Total Investing & Lending

    5,891           2,142                   175    
 

 

 

      

 

 

             

 

 

 
                  

Investment Management

                  

Management and other fees

    4,105           4,188                   (2)   

Incentive fees

    701           323                   117    

Transaction revenues

    416           523                   (20)   
                  
 

 

 

      

 

 

             

 

 

 

Total Investment Management

    5,222           5,034                     
 

 

 

      

 

 

             

 

 

 
                  
 

 

 

      

 

 

             

 

 

 

Total net revenues

  $ 34,163         $ 28,811                   19    
 

 

 

      

 

 

             

 

 

 

 

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THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

SEGMENT NET REVENUES

(UNAUDITED)

$ in millions

 

    Three Months Ended                   % Change From  
       December 31,   
2012
         September 30,  
2012
          December 31,   
2011
                    September 30,  
2012
        December 31,   
2011
 

Investment Banking

                          

Financial Advisory

  $ 508         $ 509         $ 470                   —      
                          

Equity underwriting

    304           189           191                   61          59    

Debt underwriting

    593           466           196                   27          N.M.   
 

 

 

      

 

 

      

 

 

             

 

 

    

 

 

 

Total Underwriting

    897           655           387                   37          132    
                          
 

 

 

      

 

 

      

 

 

             

 

 

    

 

 

 

Total Investment Banking

    1,405           1,164           857                   21          64    
 

 

 

      

 

 

      

 

 

             

 

 

    

 

 

 
                          

Institutional Client Services

                          

Fixed Income, Currency and Commodities Client Execution

    2,038           2,224           1,363                   (8)         50    
                          

Equities client execution (13)

    764           847           526                   (10)         45    

Commissions and fees

    722           721           782                   —          (8)   

Securities services

    818           392           385                   109          112    
 

 

 

      

 

 

      

 

 

             

 

 

    

 

 

 

Total Equities

    2,304           1,960           1,693                   18          36    
                          
 

 

 

      

 

 

      

 

 

             

 

 

    

 

 

 

Total Institutional Client Services

    4,342           4,184           3,056                           42    
 

 

 

      

 

 

      

 

 

             

 

 

    

 

 

 
                          

Investing & Lending

                          

ICBC

    334           99           388                   N.M.         (14)   

Equity securities (excluding ICBC)

    789           824           384                   (4)         105    

Debt securities and loans

    485           558           (221)                  (13)         N.M.   

Other

    365           323           321                   13          14    
                          
 

 

 

      

 

 

      

 

 

             

 

 

    

 

 

 

Total Investing & Lending

    1,973           1,804           872                           126    
 

 

 

      

 

 

      

 

 

             

 

 

    

 

 

 
                          

Investment Management

                          

Management and other fees

    1,067           1,016           1,016                             

Incentive fees

    344           82           141                   N.M.         144    

Transaction revenues

    105           101           107                           (2)   
                          
 

 

 

      

 

 

      

 

 

             

 

 

    

 

 

 

Total Investment Management

    1,516           1,199           1,264                   26          20    
 

 

 

      

 

 

      

 

 

             

 

 

    

 

 

 
                          
 

 

 

      

 

 

      

 

 

             

 

 

    

 

 

 

Total net revenues

  $ 9,236         $ 8,351         $ 6,049                   11          53    
 

 

 

      

 

 

      

 

 

             

 

 

    

 

 

 

 

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THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)

In millions, except per share amounts

 

    Year Ended                   % Change From  
       December 31,   
2012
       December 31,   
2011
                  December 31,
2011
 

Revenues

               

Investment banking

  $ 4,941      $ 4,361                  13 

Investment management

    4,968        4,691                    

Commissions and fees

    3,161        3,773                  (16)   

Market making

    11,348  (14)      9,287                  22    

Other principal transactions

    5,865        1,507                  N.M.   
 

 

 

   

 

 

             

 

 

 

Total non-interest revenues

    30,283        23,619                  28    
               

Interest income

    11,381        13,174                  (14)   

Interest expense

    7,501        7,982                  (6)   
 

 

 

   

 

 

             

 

 

 

Net interest income

    3,880        5,192                  (25)   
 

 

 

   

 

 

             

 

 

 
               

Net revenues, including net interest income

    34,163        28,811                  19    
 

 

 

   

 

 

             

 

 

 
               

Operating expenses

               

Compensation and benefits

    12,944        12,223                    
               

Brokerage, clearing, exchange and distribution fees

    2,208        2,463                  (10)   

Market development

    509        640                  (20)   

Communications and technology

    782        828                  (6)   

Depreciation and amortization

    1,738        1,865                  (7)   

Occupancy

    875        1,030                  (15)   

Professional fees

    867        992                  (13)   

Insurance reserves

    598        529                  13    

Other expenses

    2,435        2,072                  18    
 

 

 

   

 

 

             

 

 

 

Total non-compensation expenses

    10,012        10,419                  (4)   
               
 

 

 

   

 

 

             

 

 

 

Total operating expenses

    22,956        22,642                    
 

 

 

   

 

 

             

 

 

 
               

Pre-tax earnings

    11,207        6,169                  82    

Provision for taxes

    3,732        1,727                  116    
 

 

 

   

 

 

             

 

 

 

Net earnings

    7,475        4,442                  68    
               

Preferred stock dividends

    183        1,932                  (91)   
 

 

 

   

 

 

             

 

 

 

Net earnings applicable to common shareholders

  $ 7,292      $ 2,510                  191    
 

 

 

   

 

 

             

 

 

 
               

Earnings per common share

               

Basic (15)

  $ 14.63      $ 4.71                  N.M.

Diluted

    14.13        4.51                  N.M.   
               

Average common shares outstanding

               

Basic

    496.2        524.6                  (5)   

Diluted

    516.1        556.9                  (7)   

 

- 10 -


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  
       December 31,   
2012
      September 30,  
2012
          December 31,   
2011
                    September 30,  
2012
        December 31,   
2011
 

Revenues

                       

Investment banking

  $ 1,407      $ 1,168         $ 863                  20       63 

Investment management

    1,450        1,147           1,196                  26          21    

Commissions and fees

    754        748           804                          (6)   

Market making

    2,696  (14)      2,650           1,289                          109    

Other principal transactions

    1,956        1,802           832                          135    
 

 

 

   

 

 

      

 

 

             

 

 

    

 

 

 

Total non-interest revenues

    8,263        7,515           4,984                  10          66    
                       

Interest income

    2,864        2,629           3,032                          (6)   

Interest expense

    1,891        1,793           1,967                          (4)   
 

 

 

   

 

 

      

 

 

             

 

 

    

 

 

 

Net interest income

    973        836           1,065                  16          (9)   
 

 

 

   

 

 

      

 

 

             

 

 

    

 

 

 
                       

Net revenues, including net interest income

    9,236        8,351           6,049                  11          53    
 

 

 

   

 

 

      

 

 

             

 

 

    

 

 

 
                       

Operating expenses

                       

Compensation and benefits

    1,976        3,675           2,208                  (46)         (11)   
                       

Brokerage, clearing, exchange and distribution fees

    550        547           560                          (2)   

Market development

    140        123           138                  14            

Communications and technology

    194        190           211                          (8)   

Depreciation and amortization

    500        396           514                  26          (3)   

Occupancy

    232        217           249                          (7)   

Professional fees

    215        205           243                          (12)   

Insurance reserves

    167        153           127                          31    

Other expenses

    949        547           552                  73          72    
 

 

 

   

 

 

      

 

 

             

 

 

    

 

 

 

Total non-compensation expenses

    2,947        2,378           2,594                  24          14    
                       
 

 

 

   

 

 

      

 

 

             

 

 

    

 

 

 

Total operating expenses

    4,923        6,053           4,802                  (19)           
 

 

 

   

 

 

      

 

 

             

 

 

    

 

 

 
                       

Pre-tax earnings

    4,313        2,298           1,247                  88          N.M.   

Provision for taxes

    1,421        786           234                  81          N.M.   
 

 

 

   

 

 

      

 

 

             

 

 

    

 

 

 

Net earnings

    2,892        1,512           1,013                  91          185    
                       

Preferred stock dividends

    59        54           35                          69    
 

 

 

   

 

 

      

 

 

             

 

 

    

 

 

 

Net earnings applicable to common shareholders

  $ 2,833      $ 1,458         $ 978                  94          190    
 

 

 

   

 

 

      

 

 

             

 

 

    

 

 

 
                       

Earnings per common share

                       

Basic (15)

  $ 5.87      $ 2.95         $ 1.91                  99       N.M.

Diluted

    5.60        2.85           1.84                  96          N.M.   
                       

Average common shares outstanding

                       

Basic

    481.5        491.2           508.0                  (2)         (5)   

Diluted

    505.6        510.9           531.8                  (1)         (5)   
                       

Selected Data

                       

Total staff at period-end (11)

    32,400        32,600           33,300                  (1)         (3)   

 

- 11 -


THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES

SELECTED FINANCIAL DATA

(UNAUDITED)

 

Average Daily VaR (16)

$ in millions

 
                      
    Three Months Ended                   Year Ended  
       December 31,   
2012
      September 30,  
2012
          December 31,   
2011
                     December 31,   
2012
       December 31,   
2011
 

Risk Categories

                      

Interest rates

  $ 67       $ 73          $ 123                 $ 78       $ 94    

Equity prices

    31         21            23                   26         33    

Currency rates

    11         12            21                   14         20    

Commodity prices

    20         22            26                   22         32    

Diversification effect (16)

    (53)        (47)           (58)                  (54)        (66)   
 

 

 

   

 

 

      

 

 

             

 

 

   

 

 

 

Total

  $ 76       $ 81          $ 135                 $ 86       $ 113    
 

 

 

   

 

 

      

 

 

             

 

 

   

 

 

 

Assets Under Supervision (9)

$ in billions

 
                      
    As of                   % Change From  
       December 31,   
2012
      September 30,  
2012
          December 31,
2011
                    September 30,  
2012
       December 31,   
2011
 

Asset Class

                      

Alternative investments

  $ 133       $ 136          $ 142                   (2)     (6)

Equity

    133         135            126                   (1)          

Fixed income

    370         378            340                   (2)          
 

 

 

   

 

 

      

 

 

             

 

 

   

 

 

 

Total non-money market assets

    636         649            608                   (2)          
                      

Money markets

    218         207            220                          (1)   
 

 

 

   

 

 

      

 

 

             

 

 

   

 

 

 

Total assets under management (AUM)

    854         856            828                   —           
                      

Other client assets

    111         95            67                   17         66    
 

 

 

   

 

 

      

 

 

             

 

 

   

 

 

 

Total assets under supervision (AUS)

  $ 965       $ 951          $ 895                            
 

 

 

   

 

 

      

 

 

             

 

 

   

 

 

 
                      
    Three Months Ended                   Year Ended  
       December 31,   
2012
      September 30,  
2012
          December 31,   
2011
                     December 31,   
2012
       December 31,   
2011
 
                      

Balance, beginning of period

  $ 951       $ 916          $ 889                 $ 895       $ 917    
                      

Net inflows / (outflows)

                      

Alternative investments

    (3)        (3)           (2)                  (11)        (5)   

Equity

    (5)        (1)           (7)                  (13)        (9)   

Fixed income

    (10)                  (12)                         (15)   
 

 

 

   

 

 

      

 

 

             

 

 

   

 

 

 

Total non-money market net inflows / (outflows)

    (18)                  (21)                  (16)        (29)   
                      

Money markets

    11         (2)           13                   (2)        12    
 

 

 

   

 

 

      

 

 

             

 

 

   

 

 

 

Total AUM net inflows / (outflows)

    (7)        (1)           (8)                  (18)        (17)  (17) 
                      

Other client assets

    15         14            (3)                  39         (10)   
 

 

 

   

 

 

      

 

 

             

 

 

   

 

 

 

Total AUS net inflows / (outflows)

    8  (10)      13            (11)                  21  (10)      (27)   
                      

Net market appreciation / (depreciation)

           22            17                   49           
                      
 

 

 

   

 

 

      

 

 

             

 

 

   

 

 

 

Balance, end of period

  $ 965       $ 951          $ 895                 $ 965       $ 895    
 

 

 

   

 

 

      

 

 

             

 

 

   

 

 

 

 

- 12 -


Footnotes

 

(1)

ROE is computed by dividing net earnings (or annualized net earnings for annualized ROE) applicable to common shareholders by average monthly common shareholders’ equity. The table below presents the firm’s average common shareholders’ equity:

 

              Average for the    
Unaudited, in millions   

Year Ended

December 31, 2012

   

Three Months Ended

December 31, 2012

 

 

 

Total shareholders’ equity

   $ 72,530      $ 74,767   

Preferred stock

     (4,392     (5,988

 

 

Common shareholders’ equity

   $ 68,138      $ 68,779   

 

 

 

(2)

Thomson Reuters — January 1, 2012 through December 31, 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       December 31, 2012   

 

 

Total shareholders’ equity

     $ 75,716   

Preferred stock

       (6,200

 

 

Common shareholders’ equity

       69,516   

Goodwill and identifiable intangible assets

       (5,099

 

 

Tangible common shareholders’ equity

     $ 64,417   

 

 

 

(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 September 30, 2012.

 

(5)

Represents a preliminary estimate as of the date of this earnings release and may be revised in the firm’s Annual Report on Form 10-K for the year ended December 31, 2012.

 

(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 (Basel 1) were approximately $400 billion as of December 31, 2012. 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 September 30, 2012.

 

(7)

The Tier 1 common ratio equals Tier 1 common capital divided by risk-weighted assets. As of December 31, 2012, Tier 1 common capital was $58.05 billion, consisting of Tier 1 capital of $66.98 billion less preferred stock of $6.20 billion and junior subordinated debt issued to trusts of $2.73 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 September 30, 2012.

 

(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)

Assets under supervision 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 assets related to advisory relationships where the firm earns a fee for advisory and other services.

 

(10)

Includes $34 billion of fixed income asset inflows in connection with the firm’s acquisition of Dwight Asset Management Company LLC, including $17 billion in assets under management and $17 billion in other client assets, for the year ended December 31, 2012. Includes $5 billion of fixed income and equity asset outflows in connection with the firm’s liquidation of Goldman Sachs Asset Management Korea Co., Ltd. (formerly known as Macquarie — IMM Investment Management), all related to assets under management, for both the three months and the year ended December 31, 2012.

 

(11)

Includes employees, consultants and temporary staff.

 

(12)

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 Quarterly Report on Form 10-Q for the period ended September 30, 2012, share repurchases require approval by the Board of Governors of the Federal Reserve System.

 

(13)

Includes net revenues related to reinsurance of $1.08 billion and $880 million for the years ended December 31, 2012 and December 31, 2011, respectively, and $317 million, $297 million and $158 million for the three months ended December 31, 2012, September 30, 2012 and December 31, 2011, respectively.

 

- 13 -


Footnotes (continued)

 

 

(14)

Includes a gain of approximately $500 million on the sale of the firm’s hedge fund administration business.

 

(15)

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 $0.07 for both the years ended December 31, 2012 and December 31, 2011, $0.01 for the three months ended December 31, 2012 and $0.02 for both the three months ended September 30, 2012 and December 31, 2011.

 

(16)

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 September 30, 2012.

 

(17)

Includes $6 billion of asset inflows across all asset classes in connection with the firm’s acquisitions of Goldman Sachs Australia Pty Ltd and Benchmark Asset Management Company Private Limited.

 

- 14 -