10-QPeriod: Q1 FY2011

GOLDMAN SACHS GROUP INC Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 10, 2011For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

Goldman Sachs Group, Inc. (GS) reported a decrease in diluted earnings per common share to $1.56 for the first quarter of 2011, down from $5.59 in the prior year period. This decline was primarily attributed to significantly lower net revenues in Institutional Client Services, particularly in Fixed Income, Currency and Commodities Client Execution, compared to a strong first quarter in 2010. Despite this, net revenues in Investing & Lending saw a substantial increase, driven by gains in equity and debt securities, and Investment Banking and Investment Management also showed improvement. The firm redeemed its Series G Preferred Stock held by Berkshire Hathaway, which involved a significant preferred dividend impacting quarterly results. Excluding this one-time event, the company's underlying performance and book value per share showed modest growth. The firm's capital ratios remain robust, though they saw a slight decrease due to the preferred stock redemption. Overall, Goldman Sachs navigated a mixed market environment, with solid performance in some segments offset by weaker results in others, impacted by ongoing economic uncertainties and events like the earthquake in Japan.

Financial Highlights

29 data points
Beta

Net Income

$2.73B

EPS (Diluted)

$1.56

Total Assets

$933.29B

Free Cash Flow

$1.90B

Financial Statements
Beta
Net Income$2.73B
EPS (Basic)$1.66
EPS (Diluted)$1.56
Shares Outstanding (Basic)540.60M
Shares Outstanding (Diluted)583.00M

Key Highlights

  • 1Diluted EPS decreased to $1.56 from $5.59 year-over-year, impacted by lower Institutional Client Services revenues.
  • 2Net revenues from Investing & Lending increased significantly, driven by gains in equity and debt securities.
  • 3Investment Banking and Investment Management segments showed improved net revenues compared to the prior year quarter.
  • 4The firm redeemed its Series G Preferred Stock, resulting in a $1.64 billion preferred dividend that impacted net earnings and equity.
  • 5Total assets increased to $933.29 billion, while total liabilities increased to $860.82 billion.
  • 6Tier 1 Capital Ratio decreased to 14.6% from 16.0% due to the preferred stock redemption.
  • 7The firm's overall market risk (VaR) decreased, reflecting reduced exposures and lower volatility in certain categories.

Frequently Asked Questions

The primary driver for the decrease in Institutional Client Services net revenues was significantly lower results in Fixed Income, Currency and Commodities Client Execution compared to a strong performance in the first quarter of 2010. While client activity levels improved, net revenues in most product areas were lower year-over-year.

The redemption of the Series G Preferred Stock, held by Berkshire Hathaway, resulted in a $1.64 billion preferred dividend. This dividend was recorded as a reduction to net earnings applicable to common shareholders and equity, thereby reducing diluted earnings per common share by $2.82 and book value per common share by $3.06 in the first quarter of 2011.

The GCE represents unencumbered, highly liquid securities and cash held by the firm, totaling $170.69 billion as of March 2011. It is a critical component of Goldman Sachs' liquidity management strategy, designed to be readily convertible to cash to meet obligations during stressed market conditions, and is a conservative measure that excludes less liquid assets.

Goldman Sachs' Tier 1 Capital Ratio decreased to 14.6% from 16.0% as of December 2010, and the Tier 1 Leverage Ratio decreased to 7.5% from 8.0%. These decreases were primarily due to the impact of the redemption of the Series G Preferred Stock.