10-QPeriod: Q2 FY2002

GOLDMAN SACHS GROUP INC Quarterly Report for Q2 Ended May 31, 2002

Filed July 10, 2002For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

Goldman Sachs Group Inc. reported a net earnings of $563 million ($1.06 per diluted share) for the second quarter ended May 31, 2002, a slight decrease from $577 million ($1.06 per diluted share) in the same period last year. For the six months ended May 31, 2002, net earnings were $1,087 million ($2.04 per diluted share), down from $1,345 million ($2.46 per diluted share) in the prior year period. Total revenues declined significantly year-over-year, impacted by weaker performance in Trading and Principal Investments and Investment Banking, partially offset by stronger results in Asset Management and Securities Services. The company's financial condition remains robust, with total assets of $327.2 billion at the end of the second quarter. The firm's liquidity position is strong, with a substantial pool of unencumbered liquid assets. Management continues to focus on expense reduction initiatives and maintaining a diversified business model to navigate a challenging economic environment characterized by subdued equity markets and corporate activity, though favorable interest rate environments supported fixed income markets.

Key Highlights

  • 1Net earnings for Q2 2002 were $563 million, a slight decrease from $577 million in Q2 2001.
  • 2Diluted EPS for Q2 2002 was $1.06, flat compared to Q2 2001.
  • 3Total revenues for Q2 2002 were $3.85 billion, down from $3.99 billion in Q2 2001, reflecting a challenging market environment.
  • 4The Trading and Principal Investments segment saw a 15% decrease in net revenues, primarily due to weaker equity trading performance.
  • 5The Investment Banking segment's net revenues decreased by 4% due to lower underwriting activity.
  • 6Asset Management and Securities Services showed a 10% increase in net revenues, driven by higher asset under management and incentive income.
  • 7The company maintained a strong liquidity position with a substantial pool of highly liquid assets and a leverage ratio of 17.4x.
  • 8Operating expenses decreased by 3% year-over-year, reflecting successful expense reduction initiatives and the adoption of SFAS No. 142, which eliminated goodwill amortization.

Frequently Asked Questions

The second quarter of 2002 saw a mixed performance for Goldman Sachs. While Asset Management and Securities Services showed robust growth in net revenues (up 10%), driven by increased assets under management and incentive income, this was offset by declines in the Trading and Principal Investments segment (down 15%) and the Investment Banking segment (down 4%). The challenging market conditions, particularly in equity markets and corporate activity, impacted revenue generation in these segments.

Goldman Sachs maintained a strong liquidity position, with a substantial pool of unencumbered liquid assets averaging $26.80 billion during the quarter. Total assets stood at $327.2 billion. The leverage ratio was 17.4x, and the adjusted leverage ratio was 13.0x, indicating a well-capitalized financial position.

The company operates in a challenging economic and business environment, with subdued equity prices and corporate activity. However, favorable interest rate environments are beneficial for fixed income markets. Goldman Sachs continues to focus on expense reduction initiatives and leveraging its diversified business model, which includes strong Asset Management and Securities Services segments, to navigate these conditions.

The adoption of SFAS No. 142, which eliminated goodwill amortization, positively impacted the company's results by reducing operating expenses. Amortization of goodwill was lower compared to the prior year, contributing to the overall decrease in operating expenses.