10-KPeriod: FY2018

GOLDMAN SACHS GROUP INC Annual Report, Year Ended Dec 31, 2018

Filed February 26, 2019For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

Goldman Sachs Group Inc. reported a substantial increase in net earnings for 2018, reaching $10.46 billion, a significant jump from $4.29 billion in 2017. This growth was driven by higher net revenues across all business segments, particularly in Institutional Client Services (driven by Equities and FICC Client Execution), Investing & Lending (benefiting from net interest income in debt securities and loans), Investment Management (due to higher incentive fees), and Investment Banking (strong performance in Financial Advisory and Underwriting). The company's return on equity (ROE) improved to 13.3% in 2018 from 4.9% in 2017, reflecting enhanced profitability. Book value per common share also saw a healthy increase of 14.6% year-over-year. While operating expenses rose by 12%, largely due to higher compensation and benefits and provisions for litigation and regulatory proceedings, the overall financial performance demonstrates a strong recovery and growth trajectory compared to the previous year. The company also returned significant capital to shareholders through repurchases and dividends.

Financial Highlights

37 data points
Beta

Net Income

$10.46B

EPS (Diluted)

$25.27

Total Assets

$931.80B

Cash & Equivalents

$130.55B

Free Cash Flow

$8.58B

Financial Statements
Beta
Interest Expense$15.91B
Net Income$10.46B
EPS (Basic)$25.53
EPS (Diluted)$25.27
Shares Outstanding (Basic)385.40M
Shares Outstanding (Diluted)390.20M

Key Highlights

  • 1Net earnings surged to $10.46 billion in 2018, a significant increase from $4.29 billion in 2017.
  • 2Return on Equity (ROE) improved to 13.3% in 2018 from 4.9% in 2017.
  • 3Net revenues increased by 12% to $36.62 billion, with growth across all four business segments.
  • 4Investment Banking and Institutional Client Services showed strong revenue growth, driven by M&A activity and improved client execution, respectively.
  • 5Investing & Lending segment benefited from higher net interest income.
  • 6Common Equity Tier 1 (CET1) ratio remained strong at 13.3% (Standardized approach) and 13.1% (Basel III Advanced approach) as of December 2018.
  • 7The company returned $4.52 billion in capital to shareholders through share repurchases and dividends in 2018.

Frequently Asked Questions

The substantial increase in net earnings to $10.46 billion in 2018 was primarily driven by broad-based revenue growth across all four business segments: Investment Banking, Institutional Client Services, Investing & Lending, and Investment Management. Specifically, improvements in client execution in Equities and FICC, higher net interest income in debt securities and loans, increased incentive fees in Investment Management, and strong performance in Financial Advisory and Underwriting within Investment Banking contributed significantly to the improved profitability.

Operating expenses increased by 12% to $23.46 billion in 2018, primarily due to higher compensation and benefits expenses reflecting the improved operating performance and higher client activity. Additionally, there were significantly higher net provisions for litigation and regulatory proceedings. Despite the increase in expenses, the company maintained a stable efficiency ratio of 64.1% compared to 64.0% in 2017, indicating effective management of costs relative to revenue growth.

As of December 31, 2018, Goldman Sachs maintained a strong capital position. The Common Equity Tier 1 (CET1) ratio was 13.3% under the Standardized approach and 13.1% under the Basel III Advanced approach. The company's total shareholders' equity stood at $90.19 billion, with tangible common shareholders' equity at $74.90 billion.

The Tax Cuts and Jobs Act significantly impacted the 2017 financial results, leading to an estimated income tax expense of $4.40 billion. In 2018, the company finalized this estimate, resulting in a $487 million income tax benefit. Excluding these tax-related items, diluted earnings per common share and ROE showed strong growth from 2017 to 2018, demonstrating underlying business improvements.