01—Abstract
Summary
Summary of the 10-K filed February 27, 2017. Cited figures are marked; the original filing is the authoritative source.
Goldman Sachs Group, Inc. reported a significant increase in net earnings for 2016, reaching $7.4 billiona, a 22% rise from $6.08 billion in 2015, driven by a 22% increase in net earnings and a 34% rise in diluted EPS.
The firm's Return on Average Common Shareholders' Equity (ROE) improved to 9.4% from 7.4% in the prior year. Despite a 9% decrease in net revenues to $30.61 billionb, largely attributed to a challenging operating environment in the first half of the year, particularly in Investing & Lending, the firm successfully reduced operating expenses by 19% to $20.30 billion. This reduction was primarily due to significantly lower non-compensation expenses, including reduced provisions for mortgage-related litigation and regulatory matters.
The firm maintained strong capital ratios, with a Common Equity Tier 1 (CET1) ratio of 14.5% (Standardized approach) as of December 2016. Capital was returned to shareholders through $7.2 billionc in share repurchases and dividends.
While Investment Banking and Investment Management revenues saw declines, Institutional Client Services showed resilience, with market-making revenues up 4%. The firm also highlighted its robust liquidity position with $226 billiond in global core liquid assets.
02—Key points
Key Highlights
- Net earnings increased by 22% to $7.4 billion in 2016 compared to $6.08 billion in 2015.
- Diluted Earnings Per Share (EPS) rose by 34% to $16.29 in 2016 from $12.14 in 2015.
- Return on Average Common Shareholders' Equity (ROE) improved to 9.4% in 2016, up from 7.4% in 2015.
- Total operating expenses decreased by 19% to $20.30 billion in 2016, primarily due to lower non-compensation expenses, including reduced litigation provisions.
- Net revenues decreased by 9% to $30.61 billion in 2016, impacted by a challenging first half of the year.
- The firm returned $7.20 billion of capital to shareholders in 2016 through share repurchases ($6.07 billion) and dividends ($1.13 billion).
- Common Equity Tier 1 (CET1) ratio remained strong at 14.5% (Standardized approach) as of December 31, 2016.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 27, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Interest Expense | $7.10B$5.39B | +31.8% |
| Net Income | $7.40B$6.08B | +21.6% |
| EPS (Basic) | $16.53$12.35 | +33.8% |
| EPS (Diluted) | $16.29$12.14 | +34.2% |
| Shares Outstanding (Basic) | 427.40M448.90M | −4.8% |
| Shares Outstanding (Diluted) | 435.10M458.60M | −5.1% |
05—Questions
Frequently Asked Questions
What was the main driver behind the increase in net earnings for 2016?
The increase in net earnings was primarily driven by a significant reduction in operating expenses, particularly non-compensation expenses, which included lower provisions for mortgage-related litigation and regulatory matters. Despite a decrease in net revenues, the firm's expense management led to higher profitability.
How did the firm's revenue streams perform in 2016?
Net revenues decreased by 9% to $30.61 billion. Investment Banking revenues were down 11%, Investment Management revenues were down 8%, and Other Principal Transactions (Investing & Lending) revenues were down 36%. These decreases were partially offset by a 4% increase in Market Making revenues within Institutional Client Services.
What is the firm's capital position and how is it returning capital to shareholders?
Goldman Sachs maintained strong capital ratios, with a CET1 ratio of 14.5% (Standardized approach) as of December 2016. In 2016, the firm returned $7.20 billion in capital to shareholders through $6.07 billion in share repurchases and $1.13 billion in dividends.
How did the challenging operating environment in the first half of 2016 affect the firm's results?
The challenging environment, characterized by concerns about global economic growth and market volatility, negatively impacted net revenues across most business segments, particularly in Investment Banking and Investing & Lending. However, the firm's expense reduction initiatives helped mitigate the impact on net earnings.
06—Continue