01—Abstract
Summary
Summary of the 10-Q filed May 4, 2018. Cited figures are marked; the original filing is the authoritative source.
Goldman Sachs Group, Inc. reported a strong first quarter in 2018, with net earnings of $2.83 billiona, a 26% increase year-over-year, and diluted EPS of $6.95, up 35%.
This performance was driven by a 25% increase in net revenues to $10.04 billionb, with growth across all segments. The firm saw significant contributions from Institutional Client Services and Investing & Lending. Operating expenses also rose by 21% due to increased compensation and investments in growth.
The firm maintained a solid capital position with a Common Equity Tier 1 (CET1) ratio of 12.1%c under the Standardized approach. The first quarter was characterized by a more dynamic market environment with increased volatility, rising interest rates, and improving client engagement. Investment Banking saw higher revenues driven by strong debt underwriting, while Institutional Client Services benefited from increased market-making activities in equities and FICC.
The Investing & Lending segment posted robust gains, particularly from private equity investments. Investment Management also experienced revenue growth, supported by increasing assets under supervision.
02—Key points
Key Highlights
- Net earnings increased by 26% to $2.83 billion, with diluted EPS up 35% to $6.95.
- Net revenues grew by 25% to $10.04 billion, with all business segments contributing to the growth.
- Institutional Client Services and Investing & Lending segments showed significant revenue increases.
- Return on average common shareholders' equity (ROE) improved to 15.4% from 11.4% in the prior year period.
- Operating expenses increased by 21% to $6.62 billion, reflecting higher compensation and growth investments.
- Common Equity Tier 1 (CET1) ratio remained strong at 12.1% (Standardized approach).
- Investment Banking revenues increased 5%, driven by strong debt underwriting performance.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2018filed May 4, 2018Financial Statements
Q1 FY2018 against Q1 FY2017
| Line item | Q1 FY2018Q1 FY2017 | Change |
|---|---|---|
| Interest Expense | $3.31B$2.23B | +48.5% |
| Net Income | $2.83B$2.25B | +25.6% |
| EPS (Basic) | $7.02$5.23 | +34.2% |
| EPS (Diluted) | $6.95$5.15 | +35.0% |
| Shares Outstanding (Basic) | 389.10M412.50M | −5.7% |
| Shares Outstanding (Diluted) | 393.80M420.10M | −6.3% |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant increase in net revenues for the first quarter of 2018?
The primary driver of the 25% increase in net revenues to $10.04 billion was strong performance across all business segments, with notable growth in Institutional Client Services and Investing & Lending. Specifically, market-making activities in equities and FICC, as well as gains from private equity investments, contributed significantly to the revenue increase.
How did operating expenses change and what led to the increase?
Operating expenses rose by 21% to $6.62 billion compared to the prior year's first quarter. This increase was attributed to higher compensation and benefits expenses, reflecting the significant rise in net revenues, and increased non-compensation expenses related to higher client activity and strategic investments in growth initiatives.
What is the firm's capital position as of March 2018?
Goldman Sachs maintained a strong capital position. As of March 31, 2018, the Common Equity Tier 1 (CET1) ratio was 12.1% under the Standardized approach and 11.1% under the Basel III Advanced approach, on a fully phased-in basis, indicating robust capital adequacy.
How did the market environment in Q1 2018 impact Goldman Sachs' performance?
The first quarter of 2018 was characterized by better prospects for global growth, rising interest rates, and increased market volatility. This environment positively impacted Goldman Sachs, leading to improved client engagement in market-making activities and higher revenues in segments like Institutional Client Services. While equity prices generally declined, volatility provided opportunities for trading revenues.
06—Continue