10-QPeriod: Q2 FY2010

GOLDMAN SACHS GROUP INC Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 9, 2010For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

Goldman Sachs Group, Inc. (GS) reported a significant decline in net earnings for the second quarter of 2010 compared to the same period in 2009, with diluted earnings per common share falling to $0.78 from $4.93. This was largely driven by substantially lower net revenues in the Trading and Principal Investments segment, particularly within Fixed Income, Currencies, and Commodities (FICC) and Equities, which faced challenging market conditions including lower activity levels and widening credit spreads. The firm also incurred significant one-time expenses, including a $600 million UK bank payroll tax and a $550 million settlement with the SEC related to a CDO offering. Excluding these items, diluted earnings per share were $2.75, and the annualized return on average common shareholders' equity was 9.5%. Despite the weaker quarterly performance and increased expenses, the firm saw an increase in total assets to $883.19 billion and total shareholders' equity to $73.82 billion, reflecting robust capital positioning with a Tier 1 capital ratio of 15.2%.

Financial Highlights

28 data points
Beta

Net Income

$613.00M

EPS (Diluted)

$0.78

Total Assets

$883.19B

Free Cash Flow

$9.95B

Financial Statements
Beta
Net Income$613.00M
EPS (Basic)$0.82
EPS (Diluted)$0.78
Shares Outstanding (Basic)539.80M
Shares Outstanding (Diluted)580.40M

Key Highlights

  • 1Net earnings applicable to common shareholders for the three months ended June 30, 2010, were $453 million, a significant decrease from $2,718 million in the prior year's period.
  • 2Diluted earnings per common share were $0.78 for the quarter, down from $4.93 in the second quarter of 2009.
  • 3Total net revenues decreased to $8.84 billion from $13.76 billion year-over-year, primarily due to a decline in Trading and Principal Investments.
  • 4The firm recognized $600 million for the UK bank payroll tax and $550 million for the SEC settlement in operating expenses during the quarter.
  • 5Despite the revenue decline, total assets grew to $883.19 billion and total shareholders' equity increased to $73.82 billion.
  • 6The Tier 1 capital ratio remained strong at 15.2%, and the Tier 1 leverage ratio was 8.0% as of June 30, 2010.

Frequently Asked Questions

The main driver of the decline in net earnings was a significant decrease in net revenues from the Trading and Principal Investments segment, particularly within FICC and Equities, which faced challenging market conditions. Additionally, the firm incurred substantial one-time expenses, including a UK bank payroll tax and an SEC settlement.

The UK bank payroll tax and the SEC settlement collectively amounted to $1.15 billion in operating expenses for the quarter. Excluding these one-time charges, diluted earnings per common share would have been $2.75, and the annualized return on average common shareholders' equity would have been 9.5%, providing a clearer view of the underlying operational performance.

Goldman Sachs maintained a strong capital position with total assets of $883.19 billion and total shareholders' equity of $73.82 billion. The firm's Tier 1 capital ratio was 15.2%, and its Tier 1 leverage ratio was 8.0%, indicating robust capital adequacy in line with regulatory requirements.

Investment Banking saw a decrease in net revenues due to lower underwriting activity, while Financial Advisory revenue increased. Trading and Principal Investments experienced a significant decline in net revenues across FICC and Equities due to market headwinds, although Principal Investments benefited from gains on investments like ICBC. Asset Management and Securities Services saw mixed results, with Asset Management revenues growing slightly while Securities Services revenues declined due to tighter lending spreads.