10-QPeriod: Q3 FY2011

GOLDMAN SACHS GROUP INC Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 9, 2011For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

Goldman Sachs Group, Inc. (GS) reported a net loss of $393 million, or $(0.84) per diluted share, for the third quarter of 2011, a significant decline from a net earning of $1.90 billion, or $2.98 per diluted share, in the same period last year. This downturn was primarily driven by negative net revenues in the Investing & Lending segment, which was impacted by a substantial loss on its investment in ICBC and other equity and debt securities, as well as lower net revenues in Institutional Client Services and Investment Banking due to challenging market conditions, including heightened European sovereign debt risk, widening credit spreads, and declining equity markets. While Investment Management revenues saw a slight decrease, the firm also noted ongoing expense reduction initiatives aimed at cutting annual run rate costs by approximately $1.4 billion. Despite the quarterly loss, the firm maintained a strong capital position with a Tier 1 capital ratio of 13.8% under Basel 1, though this was down from the previous year. The company is actively navigating a complex regulatory environment, including the implementation of the Dodd-Frank Act and evolving Basel III capital requirements.

Financial Highlights

31 data points
Beta

Net Income

-$393.00M

EPS (Diluted)

$-0.84

Total Assets

$948.91B

Free Cash Flow

-$10.22B

Financial Statements
Beta
Net Income-$393.00M
EPS (Basic)$-0.84
EPS (Diluted)$-0.84
Shares Outstanding (Basic)518.20M
Shares Outstanding (Diluted)518.20M

Key Highlights

  • 1Goldman Sachs reported a net loss of $393 million for Q3 2011, a significant decrease from a net earning of $1.90 billion in Q3 2010.
  • 2Diluted loss per share was $(0.84) in Q3 2011, compared to diluted earnings per share of $2.98 in Q3 2010.
  • 3Investing & Lending segment experienced negative net revenues of $2.48 billion, significantly impacting overall profitability.
  • 4Challenging market conditions, including European sovereign debt concerns, widening credit spreads, and declining equity markets, negatively affected revenues across most business segments.
  • 5The firm reported total assets of $948.91 billion and total shareholders' equity of $70.09 billion as of September 30, 2011.
  • 6Tier 1 capital ratio remained strong at 13.8% under Basel 1 as of September 30, 2011.
  • 7Goldman Sachs is actively managing expenses, aiming for approximately $1.4 billion in annual run rate reductions.
  • 8The company is navigating evolving regulatory landscapes, including the Dodd-Frank Act and potential changes from Basel III.

Frequently Asked Questions

The substantial decrease in earnings was primarily due to negative net revenues in the Investing & Lending segment, driven by losses on equity and debt investments, coupled with weaker performance in Institutional Client Services and Investment Banking. These segments were negatively impacted by deteriorating global economic conditions, increased European sovereign debt risk, wider credit spreads, and declining equity markets.

Goldman Sachs maintained a strong capital position. As of September 30, 2011, its Tier 1 capital ratio under Basel 1 was 13.8%, and its Tier 1 common ratio was 12.1%. While these ratios decreased from the previous quarter and year-ago period, they remained well above regulatory minimums, indicating a solid capital base despite the challenging operating environment.

Goldman Sachs is undertaking expense reduction initiatives aimed at achieving approximately $1.4 billion in annual run rate reductions through a combination of staff reductions and planned expenditure cuts. This reflects a focus on improving efficiency and adapting to the prevailing economic and financial market conditions.

The firm is actively managing its business in anticipation of significant regulatory changes stemming from the Dodd-Frank Act and evolving Basel III capital requirements. These regulations are expected to impact proprietary trading, OTC derivatives markets, and capital requirements, and Goldman Sachs is adapting its operations and business strategies accordingly, including planning for potential redemptions from certain hedge funds and earlier liquidation of proprietary trading positions.