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8-K - FORM 8-K - GOLDMAN SACHS GROUP INC | y92006e8vk.htm |
Exhibit 99.1
The Goldman Sachs Group, Inc. | 200 West Street | New York, New York 10282
GOLDMAN SACHS REPORTS SECOND QUARTER EARNINGS PER COMMON SHARE OF $1.85 |
NEW
YORK, July 19, 2011 The Goldman Sachs Group, Inc. (NYSE: GS) today reported net
revenues of $7.28 billion and net earnings of $1.09 billion for the second quarter ended June 30,
2011. Diluted earnings per common share were $1.85 compared with $0.78 (1) for the
second quarter of 2010 and $1.56 (2) for the first quarter of 2011. Annualized return
on average common shareholders equity (ROE) (3) was 6.1% for the second quarter of 2011
and 8.0% for the first half of 2011. Excluding the preferred dividend of $1.64 billion related to
the redemption of the firms Series G Preferred Stock in the first quarter of 2011, annualized ROE
was 10.2% (4) for the first half of 2011.
Highlights
| Goldman Sachs ranked first in worldwide announced mergers and acquisitions for the
year-to-date. (5) |
|
| The firm continued its leadership in equity underwriting, ranking first in worldwide
equity and equity-related offerings, common stock offerings and initial public offerings for
the year-to-date. (5) |
|
| During the quarter, the firm repurchased 10.8 million shares of its common stock for a
total cost of $1.50 billion. Including the impact of these repurchases, book value per
common share and tangible book value per common share (6) each increased 1.6%
during the quarter to $131.44 and $121.60, respectively. |
|
| The firm continues to manage its capital conservatively. The firms Tier 1 capital
ratio under Basel 1 (7) was 14.7% and the firms Tier 1 common
ratio under Basel 1 (8) was 12.9% as of June 30, 2011. |
During the second quarter, the operating environment was more difficult given global macro-economic concerns, said Lloyd C. Blankfein, Chairman and Chief Executive Officer. In
addition, certain of our businesses had disappointing results as we reduced our market risk in
response to attempting to manage fluctuations in prices and market liquidity. Despite these
challenges, we continued to address our clients needs through our strong global franchise and
are well positioned to respond as economic conditions and sentiment improve.
Media Relations: Lucas van Praag 212-902-5400 | | | Investor Relations: Dane E. Holmes 212-902-0300 |
Net Revenues
Investment Banking
Net revenues in Investment Banking were $1.45 billion, 54% higher than the second quarter of 2010
and 14% higher than the first quarter of 2011. Net revenues in Financial Advisory were $637
million, 35% higher than the second quarter of 2010, reflecting an increase in industry-wide
completed mergers and acquisitions. Net revenues in the firms Underwriting business were $811
million, 73% higher than the second quarter of 2010. Net revenues in debt underwriting were
significantly higher than the second quarter of 2010, primarily reflecting an increase in leveraged
finance activity. Net revenues in equity underwriting were also significantly higher than the
second quarter of 2010, reflecting an increase in industry-wide equity and equity-related
offerings. The firms investment banking transaction backlog was unchanged compared with the end
of the first quarter of 2011. (9)
Institutional Client Services
Net revenues in Institutional Client Services were $3.52 billion, 29% lower than the second quarter
of 2010 and 47% lower than the first quarter of 2011.
Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.60 billion,
53% lower than the second quarter of 2010, reflecting significantly lower results in mortgages,
commodities and interest rate products. High levels of uncertainty and decreased levels of
liquidity during the quarter contributed to difficult market-making conditions, particularly in
mortgages and commodities, and prompted the firm to operate at generally lower levels of risk.
In addition, net revenues in currencies decreased slightly and net revenues in credit products
were essentially unchanged compared with the second quarter of 2010. During the quarter,
Fixed Income, Currency and Commodities Client Execution operated in a challenging
environment reflecting broad market concerns and uncertainty, which led to slightly lower levels
of activity. The effect of these macro concerns was more pronounced within the firms Asian and European
franchises.
Net revenues in Equities were $1.92 billion, 19% higher than the second quarter of 2010, primarily
reflecting higher net revenues in equities client execution. This increase reflected improved
results in derivatives compared with a difficult second quarter of 2010. However, results in the
second quarter of 2011 for equities client execution more broadly reflected a challenging
environment generally characterized by lower levels of activity and low volatility levels. In
addition, commissions and fees were lower compared with the second quarter of 2010, reflecting
lower client activity. Securities services net revenues were higher compared with the second
quarter of 2010, reflecting the impact of higher average customer balances.
Investing & Lending
Net revenues in Investing & Lending were $1.04 billion for the second quarter of 2011. Results for
the second quarter of 2011 included a loss of $176 million from the firms investment in the
ordinary shares of Industrial and Commercial Bank of China Limited (ICBC), net gains of $686
million from other investments in equities and net revenues of $200 million from debt securities
and loans, primarily reflecting net interest income.
2
Investment Management
Net revenues in Investment Management were $1.27 billion, 12% higher than the second quarter of
2010 and essentially unchanged compared with the first quarter of 2011. The increase in net
revenues compared with the second quarter of 2010 was primarily due to an increase in management
and other fees, reflecting both favorable changes in the mix of assets under management and higher
average assets under management, as well as higher incentive fees. During the quarter, assets
under management increased $4 billion to $844 billion reflecting market appreciation and inflows in
fixed income assets, partially offset by outflows in money market, alternative investment and
equity assets.
Expenses
Operating expenses were $5.67 billion, 23% lower than the second quarter of 2010 (10)
and 28% lower than the first quarter of 2011. The firm is in the process of implementing expense
reduction initiatives.
Compensation and Benefits
The accrual for compensation and benefits expenses (including salaries, estimated year-end
discretionary compensation, amortization of equity awards and other items such as benefits) was
$3.20 billion for the second quarter of 2011, a 16% decline compared with the second quarter of
2010. The ratio of compensation and benefits to net revenues for the first half of 2011 was 44.0%.
Non-Compensation Expenses
Non-compensation expenses were $2.47 billion, 18% lower than the second quarter of 2010 and 6%
lower than the first quarter of 2011. The decrease compared with the second quarter of 2010 was
primarily attributable to the impact of net provisions for litigation and regulatory proceedings of
$615 million during the second quarter of 2010 (including $550 million related to the SEC
settlement). The second quarter of 2011 included net provisions for litigation and regulatory
proceedings of $45 million.
Provision for Taxes
The effective income tax rate for the first half of 2011 was 32.4% (11), essentially
unchanged from the first quarter of 2011.
3
Capital
As of June 30, 2011, total capital was $247.57 billion, consisting of $72.36 billion in total
shareholders equity (common shareholders equity of $69.26 billion and preferred stock of $3.10
billion) and $175.21 billion in unsecured long-term borrowings. Book value per common share was
$131.44 and tangible book value per common share (6) was $121.60, each increasing 1.6%
compared with the end of the first quarter of 2011. 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 526.9 million at period end.
During the quarter, the firm repurchased 10.8 million shares of its common stock at an average
cost per share of $139.20, for a total cost of $1.50 billion. On July 18, 2011, the Board of
Directors of The Goldman Sachs Group, Inc. authorized the repurchase of an additional 75.0 million
shares of common stock pursuant to the firms existing share repurchase program. The remaining
share authorization under the firms existing repurchase program, including the newly authorized
amount, is 90.8 million shares. (12)
Under the regulatory capital guidelines currently applicable to bank holding companies (Basel 1),
the firms Tier 1 capital ratio (7) was 14.7% and the firms Tier 1 common ratio
(8) was 12.9% as of June 30, 2011, both essentially unchanged compared with the end of
the first quarter of 2011.
Other Balance Sheet and Liquidity Metrics
| Total assets (13) were $937 billion as of June 30, 2011, essentially unchanged
compared with $933 billion as of March 31, 2011. |
| Level 3 assets (13) were $47 billion as of June 30, 2011 (compared
with $46 billion as of March 31, 2011) and represented 5.0% of total assets. |
| The firms global core excess liquidity (14) was $166 billion as of
June 30, 2011 and averaged $164 billion for the second quarter of 2011, compared with an
average of $168 billion for the first quarter of 2011. |
Dividends
The Goldman Sachs Group, Inc. declared a dividend of $0.35 per common share to be paid on September
29, 2011 to common shareholders of record on September 1, 2011. The firm also declared dividends
of $239.58, $387.50, $255.56 and $255.56 per share of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, respectively (represented by
depositary shares, each representing a 1/1,000th interest in a share of preferred stock), to be
paid on August 10, 2011 to preferred shareholders of record on
July 26, 2011.
4
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 firms beliefs regarding future
events, many of which, by their nature, are inherently uncertain and outside of the firms control.
It is possible that the firms 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
firms future results and financial condition, see Risk Factors in Part I, Item 1A of the firms
Annual Report on Form 10-K for the fiscal year ended December 31, 2010.
Certain of the information regarding the firms 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 firms 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 firms investment banking transactions, see
Risk Factors in Part I, Item 1A of the firms Annual Report on Form 10-K for the fiscal year
ended December 31, 2010.
Conference Call
A conference call to discuss the firms 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 firms 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 firms web site
or by dialing 1-800-642-1687 (U.S. domestic) or
1-706-645-9291 (international) passcode number
78406876, 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.
5
THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
SEGMENT NET REVENUES
(UNAUDITED)
SEGMENT NET REVENUES
(UNAUDITED)
$ in millions
Three Months Ended | % Change From | ||||||||||||||||||||
June 30, | March 31, | June 30, | March 31, | June 30, | |||||||||||||||||
2011 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||
Investment Banking |
|||||||||||||||||||||
Financial Advisory |
$ | 637 | $ | 357 | $ | 471 | 78 | % | 35 | % | |||||||||||
Equity underwriting |
378 | 426 | 225 | (11 | ) | 68 | |||||||||||||||
Debt underwriting |
433 | 486 | 245 | (11 | ) | 77 | |||||||||||||||
Total Underwriting |
811 | 912 | 470 | (11 | ) | 73 | |||||||||||||||
Total Investment Banking |
1,448 | 1,269 | 941 | 14 | 54 | ||||||||||||||||
Institutional Client Services |
|||||||||||||||||||||
Fixed Income, Currency and Commodities Client Execution |
1,599 | 4,325 | 3,367 | (63 | ) | (53 | ) | ||||||||||||||
Equities client execution |
623 | 979 | 312 | (36 | ) | 100 | |||||||||||||||
Commissions and fees |
861 | 971 | 940 | (11 | ) | (8 | ) | ||||||||||||||
Securities services |
432 | 372 | 362 | 16 | 19 | ||||||||||||||||
Total Equities |
1,916 | 2,322 | 1,614 | (17 | ) | 19 | |||||||||||||||
Total Institutional Client Services |
3,515 | 6,647 | 4,981 | (47 | ) | (29 | ) | ||||||||||||||
Investing & Lending |
|||||||||||||||||||||
ICBC |
(176 | ) | 316 | 905 | N.M. | N.M. | |||||||||||||||
Equity securities (excluding ICBC) |
686 | 1,054 | (44 | ) | (35 | ) | N.M. | ||||||||||||||
Debt securities and loans |
200 | 1,024 | 422 | (80 | ) | (53 | ) | ||||||||||||||
Other (15) |
334 | 311 | 503 | 7 | (34 | ) | |||||||||||||||
Total Investing & Lending |
1,044 | 2,705 | 1,786 | (61 | ) | (42 | ) | ||||||||||||||
Investment Management |
|||||||||||||||||||||
Management and other fees |
1,080 | 1,048 | 966 | 3 | 12 | ||||||||||||||||
Incentive fees |
63 | 74 | 33 | (15 | ) | 91 | |||||||||||||||
Transaction revenues |
131 | 151 | 134 | (13 | ) | (2 | ) | ||||||||||||||
Total Investment Management |
1,274 | 1,273 | 1,133 | | 12 | ||||||||||||||||
Total net revenues |
$ | 7,281 | $ | 11,894 | $ | 8,841 | (39 | ) | (18 | ) | |||||||||||
Six Months Ended | % Change From | ||||||||||||||||||||
June 30, | June 30, | June 30, | |||||||||||||||||||
2011 | 2010 | 2010 | |||||||||||||||||||
Investment Banking |
|||||||||||||||||||||
Financial Advisory |
$ | 994 | $ | 935 | 6 | % | |||||||||||||||
Equity underwriting |
804 | 597 | 35 | ||||||||||||||||||
Debt underwriting |
919 | 612 | 50 | ||||||||||||||||||
Total Underwriting |
1,723 | 1,209 | 43 | ||||||||||||||||||
Total Investment Banking |
2,717 | 2,144 | 27 | ||||||||||||||||||
Institutional Client Services |
|||||||||||||||||||||
Fixed Income, Currency and Commodities Client Execution |
5,924 | 9,384 | (37 | ) | |||||||||||||||||
Equities client execution |
1,602 | 1,599 | | ||||||||||||||||||
Commissions and fees |
1,832 | 1,784 | 3 | ||||||||||||||||||
Securities services |
804 | 721 | 12 | ||||||||||||||||||
Total Equities |
4,238 | 4,104 | 3 | ||||||||||||||||||
Total Institutional Client Services |
10,162 | 13,488 | (25 | ) | |||||||||||||||||
Investing & Lending |
|||||||||||||||||||||
ICBC |
140 | 683 | (80 | ) | |||||||||||||||||
Equity securities (excluding ICBC) |
1,740 | 803 | 117 | ||||||||||||||||||
Debt securities and loans |
1,224 | 1,552 | (21 | ) | |||||||||||||||||
Other (15) |
645 | 718 | (10 | ) | |||||||||||||||||
Total Investing & Lending |
3,749 | 3,756 | | ||||||||||||||||||
Investment Management |
|||||||||||||||||||||
Management and other fees |
2,128 | 1,898 | 12 | ||||||||||||||||||
Incentive fees |
137 | 59 | 132 | ||||||||||||||||||
Transaction revenues |
282 | 271 | 4 | ||||||||||||||||||
Total Investment Management |
2,547 | 2,228 | 14 | ||||||||||||||||||
Total net revenues |
$ | 19,175 | $ | 21,616 | (11 | ) | |||||||||||||||
6
THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
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, | |||||||||||||||||
2011 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||
Revenues |
|||||||||||||||||||||
Investment banking |
$ | 1,448 | $ | 1,269 | $ | 941 | 14 | % | 54 | % | |||||||||||
Investment management |
1,188 | 1,174 | 1,046 | 1 | 14 | ||||||||||||||||
Commissions and fees |
894 | 1,019 | 978 | (12 | ) | (9 | ) | ||||||||||||||
Market making |
1,736 | 4,462 | 2,850 | (61 | ) | (39 | ) | ||||||||||||||
Other principal transactions |
602 | 2,612 | 1,407 | (77 | ) | (57 | ) | ||||||||||||||
Total non-interest revenues |
5,868 | 10,536 | 7,222 | (44 | ) | (19 | ) | ||||||||||||||
Interest income |
3,681 | 3,107 | 3,302 | 18 | 11 | ||||||||||||||||
Interest expense |
2,268 | 1,749 | 1,683 | 30 | 35 | ||||||||||||||||
Net interest income |
1,413 | 1,358 | 1,619 | 4 | (13 | ) | |||||||||||||||
Net revenues, including net interest income |
7,281 | 11,894 | 8,841 | (39 | ) | (18 | ) | ||||||||||||||
Operating expenses |
|||||||||||||||||||||
Compensation and benefits |
3,204 | 5,233 | 3,802 | (39 | ) | (16 | ) | ||||||||||||||
U.K. bank payroll tax |
| | 600 | | (100 | ) | |||||||||||||||
Brokerage, clearing, exchange and distribution fees |
615 | 620 | 622 | (1 | ) | (1 | ) | ||||||||||||||
Market development |
183 | 179 | 116 | 2 | 58 | ||||||||||||||||
Communications and technology |
210 | 198 | 186 | 6 | 13 | ||||||||||||||||
Depreciation and amortization |
372 | 590 | 437 | (37 | ) | (15 | ) | ||||||||||||||
Occupancy |
252 | 267 | 274 | (6 | ) | (8 | ) | ||||||||||||||
Professional fees |
263 | 233 | 227 | 13 | 16 | ||||||||||||||||
Other expenses |
570 | 534 | 1,129 | 7 | (50 | ) | |||||||||||||||
Total non-compensation expenses |
2,465 | 2,621 | 2,991 | (6 | ) | (18 | ) | ||||||||||||||
Total operating expenses |
5,669 | 7,854 | 7,393 | (28 | ) | (23 | ) | ||||||||||||||
Pre-tax earnings |
1,612 | 4,040 | 1,448 | (60 | ) | 11 | |||||||||||||||
Provision for taxes |
525 | 1,305 | 835 | (60 | ) | (37 | ) | ||||||||||||||
Net earnings |
1,087 | 2,735 | 613 | (60 | ) | 77 | |||||||||||||||
Preferred stock dividends |
35 | 1,827 | 160 | (98 | ) | (78 | ) | ||||||||||||||
Net earnings applicable to common shareholders |
$ | 1,052 | $ | 908 | $ | 453 | 16 | 132 | |||||||||||||
Earnings per common share |
|||||||||||||||||||||
Basic (16) |
$ | 1.96 | $ | 1.66 | $ | 0.82 | 18 | % | 139 | % | |||||||||||
Diluted |
1.85 | 1.56 | 0.78 | 19 | 137 | ||||||||||||||||
Average common shares outstanding |
|||||||||||||||||||||
Basic |
531.9 | 540.6 | 539.8 | (2 | ) | (1 | ) | ||||||||||||||
Diluted |
569.5 | 583.0 | 580.4 | (2 | ) | (2 | ) | ||||||||||||||
Selected Data |
|||||||||||||||||||||
Total staff at period end (17) |
35,500 | 35,400 | 34,100 | | 4 | ||||||||||||||||
Total staff at period end including consolidated entities held for
investment purposes (18) |
38,300 | 38,300 | 38,900 | | (2 | ) |
7
THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
In millions, except per share amounts
Six Months Ended | % Change From | ||||||||||||
June 30, | June 30, | June 30, | |||||||||||
2011 | 2010 | 2010 | |||||||||||
Revenues |
|||||||||||||
Investment banking |
$ | 2,717 | $ | 2,144 | 27 | % | |||||||
Investment management |
2,362 | 2,054 | 15 | ||||||||||
Commissions and fees |
1,913 | 1,858 | 3 | ||||||||||
Market making |
6,198 | 9,235 | (33 | ) | |||||||||
Other principal transactions |
3,214 | 3,288 | (2 | ) | |||||||||
Total non-interest revenues |
16,404 | 18,579 | (12 | ) | |||||||||
Interest income |
6,788 | 6,303 | 8 | ||||||||||
Interest expense |
4,017 | 3,266 | 23 | ||||||||||
Net interest income |
2,771 | 3,037 | (9 | ) | |||||||||
Net revenues, including net interest income |
19,175 | 21,616 | (11 | ) | |||||||||
Operating expenses |
|||||||||||||
Compensation and benefits |
8,437 | 9,295 | (9 | ) | |||||||||
U.K. bank payroll tax |
| 600 | (100 | ) | |||||||||
Brokerage, clearing, exchange and distribution fees |
1,235 | 1,184 | 4 | ||||||||||
Market development |
362 | 226 | 60 | ||||||||||
Communications and technology |
408 | 362 | 13 | ||||||||||
Depreciation and amortization |
962 | 809 | 19 | ||||||||||
Occupancy |
519 | 530 | (2 | ) | |||||||||
Professional fees |
496 | 409 | 21 | ||||||||||
Other expenses |
1,104 | 1,594 | (31 | ) | |||||||||
Total non-compensation expenses |
5,086 | 5,114 | (1 | ) | |||||||||
Total operating expenses |
13,523 | 15,009 | (10 | ) | |||||||||
Pre-tax earnings |
5,652 | 6,607 | (14 | ) | |||||||||
Provision for taxes |
1,830 | 2,538 | (28 | ) | |||||||||
Net earnings |
3,822 | 4,069 | (6 | ) | |||||||||
Preferred stock dividends |
1,862 | 320 | N.M. | ||||||||||
Net earnings applicable to common shareholders |
$ | 1,960 | $ | 3,749 | (48 | ) | |||||||
Earnings per common share |
|||||||||||||
Basic (16) |
$ | 3.62 | $ | 6.87 | (47 | )% | |||||||
Diluted |
3.40 | 6.41 | (47 | ) | |||||||||
Average common shares outstanding |
|||||||||||||
Basic |
536.2 | 542.9 | (1 | ) | |||||||||
Diluted |
576.4 | 585.2 | (2 | ) |
8
THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(UNAUDITED)
SELECTED FINANCIAL DATA
(UNAUDITED)
Average Daily VaR (19)
$ in millions
$ in millions
Three Months Ended | |||||||||||||||||||||
June 30, | March 31, | June 30, | |||||||||||||||||||
2011 | 2011 | 2010 | |||||||||||||||||||
Risk Categories |
|||||||||||||||||||||
Interest rates |
$ | 76 | $ | 87 | $ | 87 | |||||||||||||||
Equity prices |
35 | 49 | 61 | ||||||||||||||||||
Currency rates |
21 | 24 | 36 | ||||||||||||||||||
Commodity prices |
39 | 37 | 32 | ||||||||||||||||||
Diversification effect (20) |
(70 | ) | (84 | ) | (80 | ) | |||||||||||||||
Total |
$ | 101 | $ | 113 | $ | 136 | |||||||||||||||
Assets Under Management
(21) $ in billions |
|||||||||||||||||||||
As of | % Change From | ||||||||||||||||||||
June 30, | March 31, | June 30, | March 31, | June 30, | |||||||||||||||||
2011 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||
Asset Class |
|||||||||||||||||||||
Alternative investments |
$ | 148 | $ | 151 | $ | 146 | (2 | )% | 1 | % | |||||||||||
Equity |
148 | 150 | 125 | (1 | ) | 18 | |||||||||||||||
Fixed income |
352 | 338 | 326 | 4 | 8 | ||||||||||||||||
Total non-money market assets |
648 | 639 | 597 | 1 | 9 | ||||||||||||||||
Money markets |
196 | 201 | 205 | (2 | ) | (4 | ) | ||||||||||||||
Total assets under management |
$ | 844 | $ | 840 | $ | 802 | | 5 | |||||||||||||
Three Months Ended | |||||||||||||||||||||
June 30, | March 31, | June 30, | |||||||||||||||||||
2011 | 2011 | 2010 | |||||||||||||||||||
Balance, beginning of period |
$ | 840 | $ | 840 | $ | 840 | |||||||||||||||
Net inflows / (outflows) |
|||||||||||||||||||||
Alternative investments |
(3 | ) | | 1 | |||||||||||||||||
Equity |
(2 | ) | | (9 | ) | ||||||||||||||||
Fixed income |
7 | (5 | ) | (2 | ) | ||||||||||||||||
Total non-money market net inflows / (outflows) |
2 | (5 | ) | (10 | ) | ||||||||||||||||
Money markets |
(5 | ) | (7 | ) | (14 | ) | |||||||||||||||
Total net inflows / (outflows) |
(3 | ) | (12 | ) | (24 | ) | |||||||||||||||
Net market appreciation / (depreciation) |
7 | 12 | (14 | ) | |||||||||||||||||
Balance, end of period |
$ | 844 | $ | 840 | $ | 802 | |||||||||||||||
9
Footnotes
(1) | Excluding the impact of the $600 million U.K. bank payroll tax and the $550 million SEC
settlement, diluted earnings per common share were $2.75 for the second quarter of 2010.
Management believes that presenting the firms diluted earnings per common share excluding
these items is meaningful as these were one-time events and excluding them increases the
comparability of period-to-period results. Diluted earnings per common share excluding these
items is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by
other companies. The table below presents the calculation of net earnings applicable to
common shareholders and diluted earnings per common share excluding the impact of these
amounts: |
For the | ||||
Three Months Ended | ||||
June 30, 2010 | ||||
(unaudited, in millions, | ||||
except per share | ||||
amounts) | ||||
Net earnings applicable to common shareholders |
$ | 453 | ||
Impact of U.K. bank payroll tax |
600 | |||
Pre-tax impact of SEC settlement |
550 | |||
Tax impact of SEC settlement |
(6 | ) | ||
Net earnings applicable to common shareholders, excluding the impact of
U.K. bank payroll tax and SEC settlement |
$ | 1,597 | ||
Divided by: average diluted common shares outstanding |
580.4 | |||
Diluted earnings per common share, excluding the impact of
U.K. bank payroll tax and SEC settlement |
$ | 2.75 | ||
(2) | Excluding the impact of the preferred dividend of $1.64 billion related to the redemption of
the firms Series G Preferred Stock (calculated as the difference between the carrying value
and the redemption value of the preferred stock), diluted earnings per common share were
$4.38 for the first quarter of 2011. Management believes that presenting the firms diluted
earnings per common share excluding this dividend is meaningful because it increases the
comparability of period-to-period results. Diluted earnings per common share excluding this
dividend is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by
other companies. The table below presents the calculation of net earnings applicable to
common shareholders and diluted earnings per common share excluding the impact of this
dividend: |
For the | ||||
Three Months Ended | ||||
March 31, 2011 | ||||
(unaudited, in millions, | ||||
except per share | ||||
amounts) | ||||
Net earnings applicable to common shareholders |
$ | 908 | ||
Impact of the Series G Preferred Stock dividend |
1,643 | |||
Net earnings applicable to common shareholders, excluding the impact
of the Series G Preferred Stock dividend |
$ | 2,551 | ||
Divided by: average diluted common shares outstanding |
583.0 | |||
Diluted earnings per common share, excluding the impact of the
Series G Preferred Stock dividend |
$ | 4.38 | ||
(3) | Annualized ROE is computed by dividing annualized net earnings applicable to common
shareholders by average monthly common shareholders equity. The impact of the $1.64 billion
Series G Preferred Stock dividend in the first quarter of 2011 was not annualized in the
calculation of annualized net earnings applicable to common shareholders as this amount has
no impact on other quarters in the year. The table below presents the firms average common
shareholders equity: |
Average for the | ||||||||
Three Months Ended | Six Months Ended | |||||||
June 30, 2011 | June 30, 2011 | |||||||
(unaudited, $ in millions) | ||||||||
Total shareholders equity |
$ | 72,474 | $ | 74,519 | ||||
Preferred stock |
(3,100 | ) | (4,753 | ) | ||||
Common shareholders equity |
$ | 69,374 | $ | 69,766 | ||||
10
Footnotes (continued)
(4) | Management believes that presenting the firms ROE excluding the impact of the $1.64 billion
Series G Preferred Stock dividend in the first quarter of 2011 is meaningful because it
increases the comparability of period-to-period results. ROE excluding this dividend is a
non-GAAP measure and may not be comparable to similar non-GAAP measures used by other
companies. The tables below present the calculation of net earnings applicable to common
shareholders and average common shareholders equity excluding the impact of this dividend: |
For the | ||||
Six Months Ended | ||||
June 30, 2011 | ||||
(unaudited, $ in millions) | ||||
Net earnings applicable to common shareholders |
$ | 1,960 | ||
Impact of the Series G Preferred Stock dividend |
1,643 | |||
Net earnings applicable to common shareholders, excluding the impact
of the Series G Preferred Stock dividend |
$ | 3,603 | ||
Average for the | ||||
Six Months Ended | ||||
June 30, 2011 | ||||
(unaudited, $ in millions) | ||||
Total shareholders equity |
$ | 74,519 | ||
Preferred stock |
(4,753 | ) | ||
Common shareholders equity |
69,766 | |||
Impact of the Series G Preferred Stock dividend |
939 | |||
Common shareholders equity, excluding the impact of the Series G Preferred Stock dividend |
$ | 70,705 | ||
(5) | Thomson Reuters January 1, 2011 through June 30, 2011. |
|
(6) | 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 | ||||
June 30, 2011 | ||||
(unaudited, $ in millions) | ||||
Total shareholders equity |
$ | 72,356 | ||
Preferred stock |
(3,100 | ) | ||
Common shareholders equity |
69,256 | |||
Goodwill and identifiable intangible assets |
(5,187 | ) | ||
Tangible common shareholders equity |
$ | 64,069 | ||
(7) | The Tier 1 capital ratio equals Tier 1 capital divided by risk-weighted assets. The firms
risk-weighted assets under Basel 1 were approximately $451 billion as of June 30, 2011. This
ratio represents a preliminary estimate as of the date of this earnings release and may be
revised in the firms Quarterly Report on Form 10-Q for the period ended June 30, 2011. For a
further discussion of the firms capital ratios, see Equity Capital in Part I, Item 2
Managements Discussion and Analysis of Financial Condition and Results of Operations in
the firms Quarterly Report on Form 10-Q for the period ended March 31, 2011. |
|
(8) | The Tier 1 common ratio equals Tier 1 common capital divided by risk-weighted assets. As of
June 30, 2011, Tier 1 common capital was $58.3 billion, consisting of Tier 1 capital of $66.4
billion less preferred stock of $3.1 billion and junior subordinated debt issued to trusts of
$5.0 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 firms Quarterly Report on Form 10-Q for the
period ended June 30, 2011. For a further discussion of the firms capital ratios, see
Equity Capital in Part I, Item 2 Managements Discussion and Analysis of Financial
Condition and Results of Operations in the firms Quarterly Report on Form 10-Q for the
period ended March 31, 2011. |
|
(9) | The firms investment banking transaction backlog represents an estimate of the firms
future net revenues from investment banking transactions where management believes that
future revenue realization is more likely than not. |
|
(10) | The second quarter of 2010 included $600 million in expenses related to the U.K. bank payroll tax. |
11
Footnotes (continued)
(11) | The effective income tax rate for the first half of 2011 was 32.4%, compared with 35.2% for
2010. Excluding the impact of the $465 million U.K. bank payroll tax for the full year and
the $550 million SEC settlement, substantially all of which was non-deductible, the effective
income tax rate for 2010 was 32.7%. Management believes that presenting the firms effective
income tax rate for 2010 excluding the impact of these items is meaningful as excluding them
increases the comparability of period-to-period results. Effective income tax rate excluding
the impact of these items is a non-GAAP measure and may not be comparable to similar non-GAAP
measures used by other companies. The table below presents the calculation of the effective
income tax rate excluding the impact of these amounts: |
For the | ||||||||||||
Year Ended December 31, 2010 | ||||||||||||
Pre-tax | Provision | Effective income | ||||||||||
earnings | for taxes | tax rate | ||||||||||
(unaudited, $ in millions) | ||||||||||||
As reported |
$ | 12,892 | $ | 4,538 | 35.2 | % | ||||||
Add back: |
||||||||||||
Impact of the U.K. bank payroll tax |
465 | | ||||||||||
Impact of the SEC settlement |
550 | 6 | ||||||||||
As adjusted |
$ | 13,907 | $ | 4,544 | 32.7 | % | ||||||
(12) | As disclosed in Note 19. Shareholders Equity in Part I, Item 1 Financial Statements in
the firms Quarterly Report on Form 10-Q for the period ended March 31, 2011, share
repurchases require approval by the Board of Governors of the Federal Reserve System. |
|
(13) | This amount represents a preliminary estimate as of the date of this earnings release and
may be revised in the firms Quarterly Report on Form 10-Q for the period ended June 30,
2011. |
|
(14) | The firms 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 firms Quarterly
Report on Form 10-Q for the period ended June 30, 2011. For a further discussion of the
firms global core excess liquidity pool, see Liquidity Risk Management in Part I, Item 2
Managements Discussion and Analysis of Financial Condition and Results of Operations in
the firms Quarterly Report on Form 10-Q for the period ended March 31, 2011. |
|
(15) | Primarily includes net revenues related to the firms consolidated entities held for
investment purposes. |
|
(16) | 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 to basic earnings
per common share of $0.02 for each of the three months ended June 30, 2011, March 31, 2011
and June 30, 2010, and $0.04 for each of the six months ended June 30, 2011 and June 30,
2010, respectively. |
|
(17) | Includes employees, consultants and temporary staff. |
|
(18) | Compensation and benefits and non-compensation expenses related to consolidated
entities held for investment purposes are included in their respective line items in the
consolidated statements of earnings. |
|
(19) | VaR is the potential loss in value of the firms inventory positions due to adverse market
movements over a one-day time horizon with a 95% confidence level. For a further discussion
of VaR, see Market Risk Management in Part I, Item 2 Managements Discussion and Analysis
of Financial Condition and Results of Operations in the firms Quarterly Report on Form 10-Q
for the period ended March 31, 2011. |
|
(20) | Equals the difference between total VaR and the sum of the VaRs for the four risk
categories. This effect arises because the four market risk categories are not perfectly
correlated. |
|
(21) | Assets under management include only client assets where the firm earns a fee for managing
assets on a discretionary basis. |
12