01—Abstract
Summary
Summary of the 10-K filed February 22, 2016. Cited figures are marked; the original filing is the authoritative source.
Goldman Sachs Group, Inc. (GS) reported net earnings of $6.08 billiona for the fiscal year ended December 31, 2015, a decrease of 28% compared to 2014, primarily due to provisions of $3.37 billion for an agreement in principle to resolve mortgage-backed securities investigations.
This significantly impacted the firm's return on average common shareholders' equity, which fell to 7.4% from 11.2% in the prior year. Despite the earnings decline, book value per common share increased by 5% to $171.03b, reflecting ongoing capital management and share repurchases. Net revenues for 2015 were $33.82 billion, a slight decrease from 2014, driven by a substantial decline in Investing & Lending, partly offset by higher revenues in Investment Banking and Investment Management.
Operating expenses rose by 13% to $25.04 billionc, largely due to the aforementioned provisions for litigation and regulatory matters. The firm maintained strong capital ratios, with a Common Equity Tier 1 ratio of 12.4% under the Basel III Advanced approach, indicating robust capital adequacy in a changing regulatory environment.
02—Key points
Key Highlights
- Net earnings decreased by 28% to $6.08 billion, significantly impacted by $3.37 billion in provisions for mortgage-related investigations.
- Return on average common shareholders' equity (ROE) declined to 7.4% from 11.2% in the prior year.
- Book value per common share increased by 5% to $171.03, reflecting effective capital management.
- Net revenues were $33.82 billion, a 2% decrease, with Investment Banking and Investment Management showing growth, while Investing & Lending declined.
- Operating expenses increased by 13% to $25.04 billion, mainly due to increased provisions for litigation and regulatory matters.
- Common Equity Tier 1 ratio remained strong at 12.4% (Basel III Advanced approach), demonstrating robust capital position.
- The firm repurchased $4.20 billion of its common stock during the year, signaling a commitment to returning capital to shareholders.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 22, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Interest Expense | $5.39B$5.56B | −3.0% |
| Net Income | $6.08B$8.48B | −28.2% |
| EPS (Basic) | $12.35$17.55 | −29.6% |
| EPS (Diluted) | $12.14$17.07 | −28.9% |
| Shares Outstanding (Basic) | 448.90M458.90M | −2.2% |
| Shares Outstanding (Diluted) | 458.60M473.20M | −3.1% |
05—Questions
Frequently Asked Questions
What was the primary driver for the decrease in net earnings in 2015?
The primary driver for the decrease in net earnings was the $3.37 billion in provisions recorded for the agreement in principle to resolve investigations related to residential mortgage-backed securities. This significantly impacted profitability and return on equity.
How did Goldman Sachs manage its capital and liquidity during 2015?
Goldman Sachs maintained strong capital ratios, with a Common Equity Tier 1 ratio of 12.4% under the Basel III Advanced approach. The firm also continued its share repurchase program, buying back $4.20 billion of common stock, and managed its liquidity through a robust Global Core Liquid Assets (GCLA) buffer and conservative asset-liability management principles.
Which business segments performed well in 2015, and which faced challenges?
Investment Banking and Investment Management segments showed positive revenue growth. Investment Banking benefited from strong M&A activity, while Investment Management saw higher average assets under supervision and net inflows. The Institutional Client Services segment's revenues were relatively stable. However, the Investing & Lending segment experienced a significant revenue decline, primarily due to lower gains from investments in equities and debt securities.
What is the outlook for the firm's performance based on the discussion of the business environment?
The firm noted that concerns about global economic growth and uncertainty about U.S. monetary policy, alongside lower equity prices and widening credit spreads, contributed to more challenging market-making conditions. If these macroeconomic concerns persist and activity levels decline, net revenues across several segments could be negatively impacted.
06—Continue