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8-K - FORM 8-K - GOLDMAN SACHS GROUP INC | y93105e8vk.htm |
Exhibit 99.1
The Goldman Sachs Group, Inc. | 200 West Street | New York, New York 10282
GOLDMAN SACHS REPORTS THIRD QUARTER LOSS PER COMMON SHARE OF $0.84 |
NEW YORK, October 18, 2011 The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues
of $3.59 billion and a net loss of $393 million for the third quarter ended September 30, 2011.
The diluted loss per common share was $0.84 compared with diluted earnings per common share of
$2.98 for the third quarter of 2010 and $1.85 for the second quarter of 2011.
Annualized return on average common shareholders equity (ROE) (1) was 3.7% for the
first nine months 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
6.0% (2) for the first nine months of 2011.
Highlights
| Goldman Sachs continued to rank first in worldwide announced mergers and acquisitions for
the year-to-date. (3) |
|
| 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. (3) |
|
| The firms global core excess liquidity (4) averaged $164 billion for the third
quarter of 2011, unchanged compared with the average for the second quarter of 2011. |
CEO and investor confidence as well as asset prices across markets were lower in the third
quarter given the uncertain macroeconomic and market conditions. Our results were significantly
impacted by the environment and we were disappointed to record a loss in the quarter, said Lloyd
C. Blankfein, Chairman and Chief Executive Officer. However, we believe the strength of both our
client franchise and our balance sheet positions us well for when economies and markets 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 $781 million, 33% lower than the third quarter of 2010 and
46% lower than the second quarter of 2011. Net revenues in Financial Advisory were $523 million,
up slightly from the third quarter of 2010. Net revenues in the firms Underwriting business were
$258 million, 61% lower than the third quarter of 2010. Net revenues in both equity underwriting
and debt underwriting were significantly lower than the third quarter of 2010, reflecting a
significant decline in industry-wide activity. The firms investment banking transaction backlog
increased compared with the end of the second quarter of 2011. (5)
Institutional Client Services
Net revenues in Institutional Client Services were $4.06 billion, 13% lower than the third quarter
of 2010 and 16% higher than the second quarter of 2011.
Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.73 billion, 36%
lower than the third quarter of 2010. During the quarter, global economic uncertainty intensified,
resulting in volatile markets and significantly wider credit spreads. Although these factors
contributed to difficult market-making conditions, particularly in credit products, mortgages and
currencies, activity levels were generally consistent with the prior quarter. The decline in net
revenues compared with the third quarter of 2010 reflected significantly lower results in credit
products, mortgages and, to a lesser extent, currencies. Net revenues in commodities and interest
rate products were both higher compared with the third quarter of 2010.
Net revenues in Equities were $2.33 billion, 18% higher than the third quarter of 2010. This
increase was primarily due to significantly higher commissions and fees, reflecting higher
transaction volumes. Securities services net revenues were higher compared with the third quarter
of 2010, primarily reflecting the impact of higher average customer balances. In addition, net
revenues in equities client execution were slightly higher compared with the third quarter of 2010.
During the quarter, Equities operated in an environment characterized by a significant decline in
global equity markets and a sharp increase in volatility levels.
Investing & Lending
Investing & Lending recorded negative net revenues of $2.48 billion for the third quarter of 2011.
These results reflected a significant decline in global equity markets and unfavorable credit
markets. Results for the third quarter of 2011 included a loss of $1.05 billion from the firms
investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC), net
losses of $1.00 billion from other investments in equities, primarily in public equities, as well
as net losses of $907 million from debt securities and loans. These net losses were partially
offset by net revenues related to the firms consolidated entities held for investment purposes.
2
Investment Management
Net revenues in Investment Management were $1.22 billion, 4% lower than both the third quarter of
2010 and the second quarter of 2011. The decrease in net revenues compared with the third quarter
of 2010 was due to lower incentive fees, partially offset by higher management and other fees,
primarily reflecting higher average assets under management. During the quarter, assets under
management decreased $23 billion to $821 billion, reflecting net market depreciation of $29
billion, primarily in equity assets, partially offset by net inflows of $6 billion (6).
Expenses
Operating expenses were $4.32 billion, 29% lower than the third quarter of 2010 and 24% lower than
the second quarter of 2011. The firm is continuing to implement the expense reduction initiatives
which began in the second quarter of 2011.
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
$1.58 billion for the third quarter of 2011, a 59% decline compared with the third quarter of 2010.
The ratio of compensation and benefits to net revenues for the first nine months of 2011 was
44.0%. Total staff levels decreased 4% compared with the end of the second quarter of 2011.
Non-Compensation Expenses
Non-compensation expenses were $2.74 billion, 21% higher than the third quarter of 2010 and 11%
higher than the second quarter of 2011. The increase compared with the third quarter of 2010
primarily reflected higher brokerage, clearing, exchange and distribution fees, principally
reflecting higher transaction volumes in Equities, and the impact of the U.K. bank levy
(7) of approximately $100 million (included in other expenses). The third quarter of 2011
included net provisions for litigation and regulatory proceedings of $59 million.
Provision for Taxes
The effective income tax rate for the first nine months of 2011 was 30.3% (8), down from
32.4% for the first half of 2011. The decrease in the effective income tax rate was primarily due
to an increase in permanent benefits as a percentage of lower earnings and changes in the earnings
mix.
3
Capital
As of September 30, 2011, total capital was $245.74 billion, consisting of $70.09 billion in total
shareholders equity (common shareholders equity of $66.99 billion and preferred stock of $3.10
billion) and $175.65 billion in unsecured long-term borrowings. Book value per common share was
$131.09 and tangible book value per common share (9) was $120.41, both essentially
unchanged compared with the end of the second 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 511.0 million at period end.
During the quarter, the firm repurchased 18.1 million shares of its common stock at an average
cost per share of $119.66, for a total cost of $2.16 billion. The remaining share authorization
under the firms existing repurchase program is 72.7 million shares. (10)
Under the regulatory capital guidelines currently applicable to bank holding companies (Basel 1),
the firms Tier 1 capital ratio (11) was 13.8% and the firms Tier 1 common ratio (12) was 12.1% as of September 30, 2011, compared with 14.7% and 12.9%, respectively, as of
the end of the second quarter of 2011.
Other Balance Sheet and Liquidity Metrics
| Total assets (13) were $949 billion as of September 30, 2011, compared with $937 billion as of June 30, 2011. |
|
| Level 3 assets (13) were $47 billion as of September 30, 2011, unchanged from June 30, 2011, and represented 4.9% of total assets. |
|
| The firms global core excess liquidity (4) was $164 billion as of September 30, 2011 and averaged $164 billion for the third quarter of 2011, unchanged compared with the
average for the second quarter of 2011. |
Dividends
The Goldman Sachs Group, Inc. declared a dividend of $0.35 per common share to be paid on December
29, 2011 to common shareholders of record on December 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 November 10, 2011 to preferred shareholders of record on October 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 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 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
97264639, 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 | |||||||||||||||||||
September 30, | June 30, | September 30, | June 30, | September 30, | ||||||||||||||||
2011 | 2011 | 2010 | 2011 | 2010 | ||||||||||||||||
Investment Banking |
||||||||||||||||||||
Financial Advisory |
$ | 523 | $ | 637 | $ | 499 | (18 | )% | 5 | % | ||||||||||
Equity underwriting |
90 | 378 | 310 | (76 | ) | (71 | ) | |||||||||||||
Debt underwriting |
168 | 433 | 350 | (61 | ) | (52 | ) | |||||||||||||
Total Underwriting |
258 | 811 | 660 | (68 | ) | (61 | ) | |||||||||||||
Total Investment Banking |
781 | 1,448 | 1,159 | (46 | ) | (33 | ) | |||||||||||||
Institutional Client Services |
||||||||||||||||||||
Fixed Income, Currency and Commodities Client Execution |
1,731 | 1,599 | 2,687 | 8 | (36 | ) | ||||||||||||||
Equities client execution |
903 | 623 | 860 | 45 | 5 | |||||||||||||||
Commissions and fees |
1,019 | 861 | 779 | 18 | 31 | |||||||||||||||
Securities services |
409 | 432 | 343 | (5 | ) | 19 | ||||||||||||||
Total Equities |
2,331 | 1,916 | 1,982 | 22 | 18 | |||||||||||||||
Total Institutional Client Services |
4,062 | 3,515 | 4,669 | 16 | (13 | ) | ||||||||||||||
Investing & Lending |
||||||||||||||||||||
ICBC |
(1,045 | ) | (176 | ) | 9 | N.M. | N.M. | |||||||||||||
Equity securities (excluding ICBC) |
(1,004 | ) | 686 | 823 | N.M. | N.M. | ||||||||||||||
Debt securities and loans |
(907 | ) | 200 | 508 | N.M. | N.M. | ||||||||||||||
Other (14) |
477 | 334 | 457 | 43 | 4 | |||||||||||||||
Total Investing & Lending |
(2,479 | ) | 1,044 | 1,797 | N.M. | N.M. | ||||||||||||||
Investment Management |
||||||||||||||||||||
Management and other fees |
1,044 | 1,080 | 1,001 | (3 | ) | 4 | ||||||||||||||
Incentive fees |
45 | 63 | 158 | (29 | ) | (72 | ) | |||||||||||||
Transaction revenues |
134 | 131 | 119 | 2 | 13 | |||||||||||||||
Total Investment Management |
1,223 | 1,274 | 1,278 | (4 | ) | (4 | ) | |||||||||||||
Total net revenues |
$ | 3,587 | $ | 7,281 | $ | 8,903 | (51 | ) | (60 | ) | ||||||||||
Nine Months Ended | % Change From | |||||||||||||||||||
September 30, | September 30, | September 30, | ||||||||||||||||||
2011 | 2010 | 2010 | ||||||||||||||||||
Investment Banking |
||||||||||||||||||||
Financial Advisory |
$ | 1,517 | $ | 1,434 | 6 | % | ||||||||||||||
Equity underwriting |
894 | 907 | (1 | ) | ||||||||||||||||
Debt underwriting |
1,087 | 962 | 13 | |||||||||||||||||
Total Underwriting |
1,981 | 1,869 | 6 | |||||||||||||||||
Total Investment Banking |
3,498 | 3,303 | 6 | |||||||||||||||||
Institutional Client Services |
||||||||||||||||||||
Fixed Income, Currency and Commodities Client Execution |
7,655 | 12,071 | (37 | ) | ||||||||||||||||
Equities client execution |
2,505 | 2,459 | 2 | |||||||||||||||||
Commissions and fees |
2,851 | 2,563 | 11 | |||||||||||||||||
Securities services |
1,213 | 1,064 | 14 | |||||||||||||||||
Total Equities |
6,569 | 6,086 | 8 | |||||||||||||||||
Total Institutional Client Services |
14,224 | 18,157 | (22 | ) | ||||||||||||||||
Investing & Lending |
||||||||||||||||||||
ICBC |
(905 | ) | 692 | N.M. | ||||||||||||||||
Equity securities (excluding ICBC) |
736 | 1,626 | (55 | ) | ||||||||||||||||
Debt securities and loans |
317 | 2,060 | (85 | ) | ||||||||||||||||
Other (14) |
1,122 | 1,175 | (5 | ) | ||||||||||||||||
Total Investing & Lending |
1,270 | 5,553 | (77 | ) | ||||||||||||||||
Investment Management |
||||||||||||||||||||
Management and other fees |
3,172 | 2,899 | 9 | |||||||||||||||||
Incentive fees |
182 | 217 | (16 | ) | ||||||||||||||||
Transaction revenues |
416 | 390 | 7 | |||||||||||||||||
Total Investment Management |
3,770 | 3,506 | 8 | |||||||||||||||||
Total net revenues |
$ | 22,762 | $ | 30,519 | (25 | ) | ||||||||||||||
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 | ||||||||||||||||||||
September 30, | June 30, | September 30, | June 30, | September 30, | |||||||||||||||||
2011 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||
Revenues |
|||||||||||||||||||||
Investment banking |
$ | 781 | $ | 1,448 | $ | 1,159 | (46 | )% | (33 | )% | |||||||||||
Investment management |
1,133 | 1,188 | 1,200 | (5 | ) | (6 | ) | ||||||||||||||
Commissions and fees |
1,056 | 894 | 807 | 18 | 31 | ||||||||||||||||
Market making |
1,800 | 1,736 | 2,849 | 4 | (37 | ) | |||||||||||||||
Other principal transactions |
(2,539 | ) | 602 | 1,760 | N.M. | N.M. | |||||||||||||||
Total non-interest revenues |
2,231 | 5,868 | 7,775 | (62 | ) | (71 | ) | ||||||||||||||
Interest income |
3,354 | 3,681 | 2,937 | (9 | ) | 14 | |||||||||||||||
Interest expense |
1,998 | 2,268 | 1,809 | (12 | ) | 10 | |||||||||||||||
Net interest income |
1,356 | 1,413 | 1,128 | (4 | ) | 20 | |||||||||||||||
Net revenues, including net interest income |
3,587 | 7,281 | 8,903 | (51 | ) | (60 | ) | ||||||||||||||
Operating expenses |
|||||||||||||||||||||
Compensation and benefits |
1,578 | 3,204 | 3,828 | (51 | ) | (59 | ) | ||||||||||||||
Brokerage, clearing, exchange and distribution fees |
668 | 615 | 519 | 9 | 29 | ||||||||||||||||
Market development |
140 | 183 | 129 | (23 | ) | 9 | |||||||||||||||
Communications and technology |
209 | 210 | 192 | | 9 | ||||||||||||||||
Depreciation and amortization |
389 | 372 | 355 | 5 | 10 | ||||||||||||||||
Occupancy |
262 | 252 | 297 | 4 | (12 | ) | |||||||||||||||
Professional fees |
253 | 263 | 256 | (4 | ) | (1 | ) | ||||||||||||||
Other expenses |
818 | 570 | 516 | 44 | 59 | ||||||||||||||||
Total non-compensation expenses |
2,739 | 2,465 | 2,264 | 11 | 21 | ||||||||||||||||
Total operating expenses |
4,317 | 5,669 | 6,092 | (24 | ) | (29 | ) | ||||||||||||||
Pre-tax earnings / (loss) |
(730 | ) | 1,612 | 2,811 | N.M. | N.M. | |||||||||||||||
Provision / (benefit) for taxes |
(337 | ) | 525 | 913 | N.M. | N.M. | |||||||||||||||
Net earnings / (loss) |
(393 | ) | 1,087 | 1,898 | N.M. | N.M. | |||||||||||||||
Preferred stock dividends |
35 | 35 | 161 | | (78 | ) | |||||||||||||||
Net earnings / (loss) applicable to common shareholders |
$ | (428 | ) | $ | 1,052 | $ | 1,737 | N.M. | N.M. | ||||||||||||
Earnings / (loss) per common share (15) |
|||||||||||||||||||||
Basic |
$ | (0.84 | ) | $ | 1.96 | $ | 3.19 | N.M. | % | N.M. | % | ||||||||||
Diluted |
(0.84 | ) | 1.85 | 2.98 | N.M. | N.M. | |||||||||||||||
Average common shares outstanding |
|||||||||||||||||||||
Basic |
518.2 | 531.9 | 541.2 | (3 | ) | (4 | ) | ||||||||||||||
Diluted |
518.2 | 569.5 | 582.7 | (9 | ) | (11 | ) | ||||||||||||||
Selected Data |
|||||||||||||||||||||
Total staff at period end (16) |
34,200 | 35,500 | 35,400 | (4 | ) | (3 | ) | ||||||||||||||
Total staff at period end including consolidated entities held for
investment purposes (17) |
36,800 | 38,300 | 38,900 | (4 | ) | (5 | ) |
7
THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
In millions, except per share amounts
Nine Months Ended | % Change From | |||||||||||
September 30, | September 30, | September 30, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Revenues |
||||||||||||
Investment banking |
$ | 3,498 | $ | 3,303 | 6 | % | ||||||
Investment management |
3,495 | 3,254 | 7 | |||||||||
Commissions and fees |
2,969 | 2,665 | 11 | |||||||||
Market making |
7,998 | 12,084 | (34 | ) | ||||||||
Other principal transactions |
675 | 5,048 | (87 | ) | ||||||||
Total non-interest revenues |
18,635 | 26,354 | (29 | ) | ||||||||
Interest income |
10,142 | 9,240 | 10 | |||||||||
Interest expense |
6,015 | 5,075 | 19 | |||||||||
Net interest income |
4,127 | 4,165 | (1 | ) | ||||||||
Net revenues, including net interest income |
22,762 | 30,519 | (25 | ) | ||||||||
Operating expenses |
||||||||||||
Compensation and benefits |
10,015 | 13,123 | (24 | ) | ||||||||
U.K. bank payroll tax |
| 600 | (100 | ) | ||||||||
Brokerage, clearing, exchange and distribution fees |
1,903 | 1,703 | 12 | |||||||||
Market development |
502 | 355 | 41 | |||||||||
Communications and technology |
617 | 554 | 11 | |||||||||
Depreciation and amortization |
1,351 | 1,164 | 16 | |||||||||
Occupancy |
781 | 827 | (6 | ) | ||||||||
Professional fees |
749 | 665 | 13 | |||||||||
Other expenses |
1,922 | 2,110 | (9 | ) | ||||||||
Total non-compensation expenses |
7,825 | 7,378 | 6 | |||||||||
Total operating expenses |
17,840 | 21,101 | (15 | ) | ||||||||
Pre-tax earnings |
4,922 | 9,418 | (48 | ) | ||||||||
Provision for taxes |
1,493 | 3,451 | (57 | ) | ||||||||
Net earnings |
3,429 | 5,967 | (43 | ) | ||||||||
Preferred stock dividends |
1,897 | 481 | N.M. | |||||||||
Net earnings applicable to common shareholders |
$ | 1,532 | $ | 5,486 | (72 | ) | ||||||
Earnings per common share |
||||||||||||
Basic (15) |
$ | 2.84 | $ | 10.06 | (72 | )% | ||||||
Diluted |
2.70 | 9.39 | (71 | ) | ||||||||
Average common shares outstanding |
||||||||||||
Basic |
530.1 | 542.3 | (2 | ) | ||||||||
Diluted |
566.6 | 584.4 | (3 | ) |
8
THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(UNAUDITED)
SELECTED FINANCIAL DATA
(UNAUDITED)
Average Daily VaR (18)
$ in millions
$ in millions
Three Months Ended | |||||||||||||||||||||
September 30, | June 30, | September 30, | |||||||||||||||||||
2011 | 2011 | 2010 | |||||||||||||||||||
Risk Categories |
|||||||||||||||||||||
Interest rates |
$ | 90 | $ | 76 | $ | 88 | |||||||||||||||
Equity prices |
24 | 35 | 58 | ||||||||||||||||||
Currency rates |
15 | 21 | 23 | ||||||||||||||||||
Commodity prices |
25 | 39 | 29 | ||||||||||||||||||
Diversification effect (19) |
(52 | ) | (70 | ) | (77 | ) | |||||||||||||||
Total |
$ | 102 | $ | 101 | $ | 121 | |||||||||||||||
Assets Under Management
(20) $ in billions |
|||||||||||||||||||||
As of | % Change From | ||||||||||||||||||||
September 30, | June 30, | September 30, | June 30, | September 30, | |||||||||||||||||
2011 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||
Asset Class |
|||||||||||||||||||||
Alternative investments |
$ | 144 | $ | 148 | $ | 148 | (3 | )% | (3 | )% | |||||||||||
Equity |
123 | 148 | 133 | (17 | ) | (8 | ) | ||||||||||||||
Fixed income |
347 | 352 | 343 | (1 | ) | 1 | |||||||||||||||
Total non-money market assets |
614 | 648 | 624 | (5 | ) | (2 | ) | ||||||||||||||
Money markets |
207 | 196 | 199 | 6 | 4 | ||||||||||||||||
Total assets under management |
$ | 821 | $ | 844 | $ | 823 | (3 | ) | | ||||||||||||
Three Months Ended | |||||||||||||||||||||
September 30, | June 30, | September 30, | |||||||||||||||||||
2011 | 2011 | 2010 | |||||||||||||||||||
Balance, beginning of period |
$ | 844 | $ | 840 | $ | 802 | |||||||||||||||
Net inflows / (outflows) |
|||||||||||||||||||||
Alternative investments |
| (3 | ) | (1 | ) | ||||||||||||||||
Equity |
| (2 | ) | (8 | ) | ||||||||||||||||
Fixed income |
(5 | ) | 7 | 2 | |||||||||||||||||
Total non-money market net inflows / (outflows) |
(5 | ) | 2 | (7 | ) | ||||||||||||||||
Money markets |
11 | (5 | ) | (6 | ) | ||||||||||||||||
Total net inflows / (outflows) |
6 | (6) | (3 | ) | (13 | ) | |||||||||||||||
Net market appreciation / (depreciation) |
(29 | ) | 7 | 34 | |||||||||||||||||
Balance, end of period |
$ | 821 | $ | 844 | $ | 823 | |||||||||||||||
9
Footnotes
(1) | 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 | Nine Months Ended | ||||||||
September 30, 2011 | September 30, 2011 | ||||||||
(unaudited, $ in millions) | |||||||||
Total shareholders equity |
$ | 71,265 | $ | 73,433 | |||||
Preferred stock |
(3,100 | ) | (4,257 | ) | |||||
Common shareholders equity |
$ | 68,165 | $ | 69,176 | |||||
(2) | 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 | ||||
Nine Months Ended | ||||
September 30, 2011 | ||||
(unaudited, $ in millions) | ||||
Net earnings applicable to common shareholders |
$ | 1,532 | ||
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 |
$ | 3,175 | ||
Average for the | ||||
Nine Months Ended | ||||
September 30, 2011 | ||||
(unaudited, $ in millions) | ||||
Total shareholders equity |
$ | 73,433 | ||
Preferred stock |
(4,257 | ) | ||
Common shareholders equity |
69,176 | |||
Impact of the Series G Preferred Stock dividend |
1,150 | |||
Common shareholders equity, excluding the impact of the Series G Preferred Stock dividend |
$ | 70,326 | ||
(3) | Thomson Reuters January 1, 2011 through September 30, 2011. |
|
(4) | 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 September 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 June 30, 2011. |
|
(5) | 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. |
|
(6) | Includes $6 billion of net asset inflows in connection with the firms acquisitions of
Goldman Sachs & Partners Australia Group Holdings Pty Ltd and Benchmark Asset Management
Company Private Limited. |
|
(7) | During the third quarter of 2011, the United Kingdom enacted legislation that imposes an
annual non-deductible tax (U.K. bank levy) on relevant liabilities, as defined in the
legislation, for periods ending on or after January 1, 2011 for certain financial services
activities of large banks, including their subsidiaries, that operate in the U.K. The firms
current estimate of the tax for 2011 is approximately $130 million, of which three-fourths,
or approximately $100 million, was recognized in non-compensation expenses during the
quarter. |
10
Footnotes (continued)
(8) | The effective income tax rate for the first nine months of 2011 was 30.3%, 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%. The decrease from 32.7% to 30.3% was primarily
due to an increase in permanent benefits as a percentage of lower earnings and changes in the
earnings mix. 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. The 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% | |||||||
(9) | 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 | ||||
September 30, 2011 | ||||
(unaudited, $ in millions) | ||||
Total shareholders equity |
$ | 70,088 | ||
Preferred stock |
(3,100 | ) | ||
Common shareholders equity |
66,988 | |||
Goodwill and identifiable intangible assets |
(5,459 | ) | ||
Tangible common shareholders equity |
$ | 61,529 | ||
(10) | The remaining share authorization represents the remaining shares that may be repurchased
under the repurchase program approved by the Board of Directors of the firm. 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 June 30, 2011, share repurchases require
approval by the Board of Governors of the Federal Reserve System. |
|
(11) | The Tier 1 capital ratio equals Tier 1 capital divided by risk-weighted assets. The firms
risk-weighted assets under Basel 1 were approximately $456 billion as of September 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 September 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 June 30, 2011. |
|
(12) | The Tier 1 common ratio equals Tier 1 common capital divided by risk-weighted assets. As of
September 30, 2011, Tier 1 common capital was $55.0 billion, consisting of Tier 1 capital of
$63.1 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 September 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 June 30, 2011. |
|
(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 September
30, 2011. |
|
(14) | Primarily includes net revenues related to the firms consolidated entities held for
investment purposes. |
|
(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 for the three months ended
September 30, 2011 was a loss per common share (basic and diluted) of $0.01. In addition, the
impact of applying this methodology was a reduction to basic earnings per common share of
$0.02 for both the three months ended June 30, 2011 and September 30, 2010, and $0.05 and
$0.06 for the nine months ended September 30, 2011 and September 30, 2010, respectively. |
|
(16) | Includes employees, consultants and temporary staff. |
|
(17) | 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. |
11
Footnotes (continued)
(18) | 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 June 30, 2011. |
|
(19) | 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. |
|
(20) | Assets under management include only client assets where the firm earns a fee for managing
assets on a discretionary basis. |
12