01—Abstract
Summary
Summary of the 10-Q filed May 4, 2017. Cited figures are marked; the original filing is the authoritative source.
Goldman Sachs Group Inc. (GS) reported strong first-quarter 2017 financial results, with net earnings of $2.26 billiona, nearly doubling the $1.14 billion reported in the first quarter of 2016.
Diluted earnings per common share also saw a substantial increase, reaching $5.15 compared to $2.68b in the prior year's quarter. This performance was driven by a significant increase in net revenues, which grew by 27% to $8.03 billion, largely due to robust performance in the Investing & Lending segment and higher contributions from Investment Banking and Investment Management.
The company also benefited from the adoption of ASU No. 2016-09, which provided a $475 millionc tax benefit, positively impacting earnings per share and return on equity. Despite an increase in operating expenses, up 15% to $5.49 billion, primarily due to higher compensation and benefits reflecting increased net revenues, the firm maintained strong capital ratios, with a Common Equity Tier 1 ratio of 14.2% and global core liquid assets of $222 billion.
02—Key points
Key Highlights
- Net earnings more than doubled year-over-year, reaching $2.26 billion in Q1 2017.
- Net revenues increased by 27% to $8.03 billion, driven by strong performance across multiple segments.
- Investing & Lending segment saw a significant revenue surge, turning a loss in Q1 2016 into a substantial pre-tax profit.
- Investment Banking revenues grew 16%, supported by stronger underwriting activity, despite a slight decline in advisory.
- Institutional Client Services revenues saw a slight decrease of 2%, impacted by lower equity client execution and commissions.
- Common Equity Tier 1 ratio remained strong at 14.2%, indicating robust capital adequacy.
- Tax benefits from adopting ASU No. 2016-09 significantly boosted net earnings and return on equity.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2017filed May 4, 2017Financial Statements
Q1 FY2017 against Q1 FY2016
| Line item | Q1 FY2017Q1 FY2016 | Change |
|---|---|---|
| Interest Expense | $2.23B$1.47B | +52.2% |
| Net Income | $2.25B$1.14B | +98.7% |
| EPS (Basic) | $5.23$2.71 | +93.0% |
| EPS (Diluted) | $5.15$2.68 | +92.2% |
| Shares Outstanding (Basic) | 412.50M440.80M | −6.4% |
| Shares Outstanding (Diluted) | 420.10M447.40M | −6.1% |
05—Questions
Frequently Asked Questions
What was the primary driver of Goldman Sachs' improved financial performance in Q1 2017 compared to Q1 2016?
The primary driver was a significant increase in net revenues, which grew by 27% to $8.03 billion. This growth was largely fueled by a substantial improvement in the Investing & Lending segment, which moved from a loss in Q1 2016 to a strong profit in Q1 2017, alongside higher revenues from Investment Banking and Investment Management.
How did the adoption of ASU No. 2016-09 impact the company's results?
The adoption of ASU No. 2016-09, related to employee share-based payment accounting, resulted in a $475 million reduction in the provision for taxes. This tax benefit significantly boosted diluted earnings per common share by $1.13 and increased the annualized return on average common shareholders' equity by 2.5 percentage points.
Were there any segments that experienced a decline in performance?
Yes, the Institutional Client Services segment saw a slight decrease in net revenues by 2% to $3.36 billion. This was primarily due to lower revenues in commissions and fees, reflecting decreased transaction volumes in Equities, and a decrease in securities services revenue.
What is the company's capital position as indicated by the filing?
Goldman Sachs maintained strong capital ratios. The Common Equity Tier 1 ratio was 14.2% under the Standardized approach and 12.9% under the Basel III Advanced approach as of March 2017. Additionally, the firm held $222 billion in global core liquid assets, indicating a solid liquidity position.
06—Continue