01—Abstract
Summary
Summary of the 10-K filed February 26, 2018. Cited figures are marked; the original filing is the authoritative source.
Goldman Sachs Group, Inc. reported a net earnings decrease of 42% to $4.29 billiona for 2017, translating to diluted earnings per share of $9.01, down from $16.29 in 2016.
This significant decline was primarily attributed to a substantial $4.40 billionb income tax expense recorded in the fourth quarter of 2017 related to the Tax Cuts and Jobs Act. Excluding this tax impact, diluted earnings per share would have been $19.76 and return on average common shareholders' equity would have been 10.8%.
Despite the headline earnings drop, net revenues increased by 5% to $32.07 billionc, driven by strong performance in Investing & Lending and growth in Investment Banking and Investment Management, which offset a decline in Institutional Client Services, particularly Fixed Income, Currency and Commodities (FICC) client execution due to low market volatility. The company returned $7.90 billion to shareholders through share repurchases and dividends.
02—Key points
Key Highlights
- Net earnings for 2017 decreased by 42% to $4.29 billion ($9.01 per diluted share) compared to $7.40 billion ($16.29 per diluted share) in 2016, largely due to a $4.40 billion tax expense related to the Tax Cuts and Jobs Act.
- Excluding the tax impact, net earnings applicable to common shareholders were $8.09 billion, and diluted EPS was $19.76, with a return on average common shareholders' equity of 10.8%.
- Net revenues increased by 5% to $32.07 billion, driven by a 61% increase in Investing & Lending net revenues ($6.58 billion) and an 18% rise in Investment Banking net revenues ($7.37 billion).
- Institutional Client Services net revenues decreased by 18% to $11.90 billion, primarily due to a 30% decline in FICC Client Execution, reflecting lower client activity and challenging market-making conditions characterized by low volatility.
- Operating expenses increased by 3% to $20.94 billion, with compensation and benefits up 2% to $11.85 billion, while non-compensation expenses rose 5% due to investments in growth initiatives.
- The firm returned $7.90 billion to common shareholders in 2017 through $6.72 billion in share repurchases and $1.18 billion in dividends.
- Common Equity Tier 1 (CET1) ratios remained strong, with the Basel III Advanced approach ratio at 10.9% as of December 31, 2017.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 26, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Interest Expense | $10.18B$7.10B | +43.3% |
| Net Income | $4.29B$7.40B | −42.1% |
| EPS (Basic) | $9.12$16.53 | −44.8% |
| EPS (Diluted) | $9.01$16.29 | −44.7% |
| Shares Outstanding (Basic) | 401.60M427.40M | −6.0% |
| Shares Outstanding (Diluted) | 409.10M435.10M | −6.0% |
05—Questions
Frequently Asked Questions
What was the primary driver for the significant decrease in net earnings in 2017?
The primary driver for the significant decrease in net earnings for 2017 was a $4.40 billion income tax expense recorded in the fourth quarter related to the Tax Cuts and Jobs Act. This one-time event heavily impacted the reported net earnings.
How did the firm's different business segments perform in 2017?
Goldman Sachs saw growth in its Investment Banking (up 18%) and Investing & Lending (up 61%) segments, driven by higher advisory and underwriting activity and strong investment gains, respectively. However, Institutional Client Services saw a decline of 18%, mainly due to lower client activity in FICC products amidst low market volatility. Investment Management revenues grew by 7% due to higher average assets under supervision.
What is the firm's capital position as of the end of 2017?
The firm maintained a strong capital position. As of December 31, 2017, the Common Equity Tier 1 (CET1) ratio under the Basel III Advanced approach was 10.9%, and the Tier 1 capital ratio was 12.7%, indicating robust capital adequacy.
How did the firm return capital to shareholders in 2017?
Goldman Sachs returned a significant amount of capital to shareholders in 2017, totaling $7.90 billion. This was comprised of $6.72 billion in common share repurchases and $1.18 billion in common stock dividends.
06—Continue