10-QPeriod: Q3 FY2017

GOLDMAN SACHS GROUP INC Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 3, 2017For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

Goldman Sachs Group, Inc. reported solid financial results for the third quarter and first nine months of 2017. For the third quarter, net earnings increased by 2% to $2.13 billion, with diluted earnings per share rising 3% to $5.02. This performance was driven by higher revenues in Investing & Lending and Investment Banking, partially offset by a decrease in Institutional Client Services, primarily in Fixed Income, Currency, and Commodities (FICC). For the year-to-date period, net earnings saw a significant 23% increase to $6.21 billion, reflecting broad-based strength across several segments. The firm maintained strong capital ratios, with its Common Equity Tier 1 (CET1) ratio at 13.3% under the Standardized approach and 12.0% under the Basel III Advanced approach. Liquidity also remained robust, with global core liquid assets totaling $220 billion. The adoption of a new accounting standard for share-based payments provided a notable benefit to the provision for taxes in the first nine months. Overall, the report indicates a stable operational environment with mixed global economic growth. While market-making activities faced challenges due to low volatility, growth in investment banking and strong performance in investing and lending contributed positively to the firm's results.

Financial Highlights

36 data points
Beta

Net Income

$2.13B

EPS (Diluted)

$5.02

Total Assets

$930.13B

Cash & Equivalents

$116.61B

Free Cash Flow

$2.02B

Financial Statements
Beta
Interest Expense$2.68B
Net Income$2.13B
EPS (Basic)$5.09
EPS (Diluted)$5.02
Shares Outstanding (Basic)398.20M
Shares Outstanding (Diluted)405.70M

Key Highlights

  • 1Net earnings for Q3 2017 increased 2% to $2.13 billion, and diluted EPS rose 3% to $5.02.
  • 2Net earnings for the first nine months of 2017 increased significantly by 23% to $6.21 billion.
  • 3Net revenues for Q3 2017 increased 2% to $8.33 billion, driven by strong performance in Investing & Lending and Investment Banking.
  • 4Institutional Client Services net revenues decreased 17% year-over-year in Q3 2017, primarily due to lower FICC Client Execution results.
  • 5The Common Equity Tier 1 (CET1) ratio remained strong at 13.3% (Standardized approach) and 12.0% (Basel III Advanced approach).
  • 6Global Core Liquid Assets (GCLA) stood at $220 billion as of September 2017, indicating strong liquidity.
  • 7A tax benefit of $496 million was recognized in the first nine months of 2017 due to the adoption of ASU No. 2016-09 regarding share-based payment accounting.

Frequently Asked Questions

The increase in net earnings for Q3 2017 was primarily driven by significantly higher net revenues in the Investing & Lending segment and higher net revenues in Investment Banking, along with net interest income. These gains were partially offset by lower net revenues in Institutional Client Services, particularly in Fixed Income, Currency, and Commodities (FICC) Client Execution.

Goldman Sachs maintained a strong capital position. The Common Equity Tier 1 (CET1) ratio was 13.3% under the Standardized approach and 12.0% under the Basel III Advanced approach as of September 30, 2017. The firm also reported robust liquidity with $220 billion in global core liquid assets.

A key challenge highlighted was the decline in net revenues within the Institutional Client Services segment, especially in Fixed Income, Currency, and Commodities (FICC) Client Execution. This was primarily attributed to lower client activity and challenging market-making conditions stemming from persistently low volatility in financial markets.

The adoption of ASU No. 2016-09, 'Compensation — Stock Compensation (Topic 718) — Improvements to Employee Share-Based Payment Accounting,' resulted in a reduction to the provision for taxes of $496 million for the first nine months of 2017. This favorably impacted diluted earnings per common share by $1.20 and the annualized return on average common shareholders' equity by 0.9 percentage points.