10-QPeriod: Q3 FY2001

GOLDMAN SACHS GROUP INC Quarterly Report for Q3 Ended Aug 31, 2001

Filed October 10, 2001For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

The Goldman Sachs Group, Inc. reported net earnings of $1.813 billion for the first nine months of fiscal year 2001, a decrease from $2.466 billion in the same period of fiscal year 2000. This decline was primarily driven by lower revenues in the Global Capital Markets segment, which fell by 17% to $8.13 billion, impacted by a slowdown in investment banking activities like mergers and acquisitions and equity underwriting. The Asset Management and Securities Services segment showed resilience, with net revenues increasing by 24% to $4.26 billion, boosted by the inclusion of Spear, Leeds & Kellogg (SLK) and growth in asset management. Despite the revenue challenges, the company managed its expenses effectively, with total operating expenses for the nine months remaining relatively flat year-over-year. The company also experienced a significant increase in cash from financing activities, while cash used in operating and investing activities increased. The balance sheet as of August 31, 2001, showed total assets of $302.03 billion and shareholders' equity of $17.96 billion. The company's leverage ratio stood at 16.8x. Notably, the report highlights the impact of the September 11, 2001 terrorist attacks on the business and economic environment, noting that while the firm's liquidity and operations were not materially affected, the attacks could lead to further weakness. The company's risk management framework, including Value at Risk (VaR) calculations, is detailed, indicating no trading losses exceeding the 95% one-day VaR during the quarter.

Key Highlights

  • 1Net earnings for the nine months ended August 31, 2001, were $1.813 billion, down from $2.466 billion in the prior year period.
  • 2Global Capital Markets net revenues decreased 17% to $8.13 billion for the nine months, significantly impacted by a slowdown in Investment Banking (Financial Advisory and Underwriting).
  • 3Asset Management and Securities Services net revenues increased 24% to $4.26 billion for the nine months, driven by the inclusion of SLK and asset growth.
  • 4Total operating expenses for the nine months were $9.41 billion, largely in line with the prior year's $9.07 billion, indicating effective cost management.
  • 5Total assets stood at $302.03 billion as of August 31, 2001, with a leverage ratio of 16.8x.
  • 6The company experienced negative net revenues of $580 million in Principal Investments for the nine months due to mark-to-market losses, primarily in technology and telecommunications sectors.
  • 7The report acknowledges the potential negative impact of the September 11, 2001 terrorist attacks on the global economy and financial markets.

Frequently Asked Questions

Goldman Sachs reported a decrease in net earnings for the first nine months of fiscal year 2001, with $1.813 billion compared to $2.466 billion in the same period of fiscal year 2000. This decline was primarily driven by lower revenues in the Global Capital Markets segment.

The Global Capital Markets segment saw a significant decline in net revenues by 17% to $8.13 billion for the nine months, mainly due to a slowdown in investment banking activities like mergers and acquisitions and equity underwriting. Conversely, the Asset Management and Securities Services segment demonstrated strong performance with a 24% increase in net revenues to $4.26 billion, benefiting from the inclusion of Spear, Leeds & Kellogg (SLK) and growth in assets under management.

The filing notes that the September 11, 2001 terrorist attacks did not materially affect Goldman Sachs' liquidity, facilities, or overall financial condition, and operational systems remained functional. However, the report acknowledges that the attacks have caused, and may continue to cause, additional weakness in the business and economic environment, and the company is evaluating their ongoing effect.

Goldman Sachs managed its expenses effectively. Total operating expenses for the nine months ended August 31, 2001, were $9.41 billion, which was only slightly higher than the $9.07 billion reported in the prior year. This was achieved through a combination of reduced compensation and benefits, partially offset by increased costs associated with business expansion and acquisitions like SLK.