01—Abstract
Summary
Summary of the 10-K filed February 28, 2012. Cited figures are marked; the original filing is the authoritative source.
Goldman Sachs Group, Inc. (GS) reported a net earnings of $4.44 billiona for the fiscal year ended December 31, 2011, a significant decrease from $8.35 billion in 2010, reflecting a challenging economic environment marked by concerns over European sovereign debt and U.S. growth uncertainty.
Net revenues declined by 26% to $28.81 billionb, primarily driven by weaker performance in Institutional Client Services and Investing & Lending segments, which saw substantial drops in net revenues compared to the prior year. The firm's return on average common shareholders' equity (ROE) fell to 3.7% (or 5.9% excluding a preferred stock dividend impact), down from 11.5% in 2010, indicating a more difficult operating year. Despite the revenue challenges, Goldman Sachs maintained a strong capital position with a Tier 1 capital ratio of 13.8% and a Tier 1 common ratio of 12.1% as of December 31, 2011.
The firm continued its share repurchase program, buying back $6.04 billionc of its common stock. The report highlights the significant impact of regulatory changes, particularly the Dodd-Frank Act, and ongoing global economic volatility as key factors influencing the firm's performance and future outlook. Investors should note the decline in most business segments, underscoring the sensitivity of the firm's earnings to broader market conditions.
02—Key points
Key Highlights
- Net earnings for 2011 were $4.44 billion, a substantial decrease from $8.35 billion in 2010.
- Net revenues for 2011 declined 26% year-over-year to $28.81 billion, driven by weaker performance in Institutional Client Services and Investing & Lending.
- Return on average common shareholders' equity (ROE) was 3.7% for 2011, down from 11.5% in 2010, reflecting the challenging operating environment.
- Tier 1 capital ratio remained strong at 13.8%, and Tier 1 common ratio was 12.1% as of December 31, 2011.
- The firm repurchased $6.04 billion of its common stock during 2011.
- Investment Banking revenues decreased 9% to $4.36 billion, primarily due to lower equity underwriting activity.
- Regulatory changes, particularly the Dodd-Frank Act, are expected to significantly impact the firm's future operations and capital requirements.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 28, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Interest Expense | $7.98B— | — |
| Net Income | $4.44B$8.35B | −46.8% |
| EPS (Basic) | $4.71$14.15 | −66.7% |
| EPS (Diluted) | $4.51$13.18 | −65.8% |
| Shares Outstanding (Basic) | 524.60M542.00M | −3.2% |
| Shares Outstanding (Diluted) | 556.90M585.30M | −4.9% |
05—Questions
Frequently Asked Questions
What was Goldman Sachs' financial performance in 2011 compared to 2010?
In 2011, Goldman Sachs reported significantly lower net earnings of $4.44 billion, a decrease from $8.35 billion in 2010. Net revenues also declined by 26% to $28.81 billion, driven by reduced activity and challenging market conditions, particularly in the Institutional Client Services and Investing & Lending segments. The return on equity (ROE) also saw a considerable drop.
How did the firm's different business segments perform in 2011?
The firm experienced a challenging year across most segments. Investment Banking revenues decreased 9% due to lower equity underwriting. Institutional Client Services saw a substantial 34% decline in Fixed Income, Currency, and Commodities client execution, although Equities saw a slight increase driven by higher commissions and fees. Investing & Lending revenue dropped significantly, and Investment Management revenues remained relatively flat year-over-year.
What is the impact of regulatory changes, such as the Dodd-Frank Act, on Goldman Sachs?
The firm acknowledges that regulatory changes, particularly the Dodd-Frank Act and evolving capital requirements like Basel 3, are significantly altering the financial regulatory landscape. These changes are expected to impact the firm's business operations, competitive position, and capital requirements, with specific provisions like the Volcker Rule creating uncertainty and necessitating adjustments to trading and investment strategies.
What is the firm's capital and liquidity position as of the end of 2011?
Goldman Sachs maintained a strong capital position, with a Tier 1 capital ratio of 13.8% and a Tier 1 common ratio of 12.1% as of December 31, 2011. The firm also emphasizes its robust liquidity management, highlighted by its substantial Global Core Excess (GCE) liquidity pool of $171.58 billion, designed to ensure operational continuity during stressed market conditions.
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