01—Abstract
Summary
Summary of the 10-Q filed May 10, 2011. Cited figures are marked; the original filing is the authoritative source.
Goldman Sachs Group, Inc. (GS) reported a decrease in diluted earnings per common share to $1.56a 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.
02—Key points
Key Highlights
- Diluted EPS decreased to $1.56 from $5.59 year-over-year, impacted by lower Institutional Client Services revenues.
- Net revenues from Investing & Lending increased significantly, driven by gains in equity and debt securities.
- Investment Banking and Investment Management segments showed improved net revenues compared to the prior year quarter.
- The firm redeemed its Series G Preferred Stock, resulting in a $1.64 billion preferred dividend that impacted net earnings and equity.
- Total assets increased to $933.29 billion, while total liabilities increased to $860.82 billion.
- Tier 1 Capital Ratio decreased to 14.6% from 16.0% due to the preferred stock redemption.
- The firm's overall market risk (VaR) decreased, reflecting reduced exposures and lower volatility in certain categories.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2011filed May 10, 2011Financial Statements
Q1 FY2011 against Q1 FY2010
| Line item | Q1 FY2011Q1 FY2010 | Change |
|---|---|---|
| Net Income | $2.73B$3.46B | −20.9% |
| EPS (Basic) | $1.66$6.02 | −72.4% |
| EPS (Diluted) | $1.56$5.59 | −72.1% |
| Shares Outstanding (Basic) | 540.60M546.00M | −1.0% |
| Shares Outstanding (Diluted) | 583.00M590.00M | −1.2% |
05—Questions
Frequently Asked Questions
What was the primary driver of the decline in net revenues for Institutional Client Services?
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.
How did the redemption of Series G Preferred Stock affect the company's financial results?
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.
What is the significance of the firm's "Global Core Excess" (GCE) liquidity measure?
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.
How did Goldman Sachs' capital ratios perform in the first quarter of 2011?
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.
06—Continue