01—Abstract
Summary
Summary of the 10-Q filed August 3, 2018. Cited figures are marked; the original filing is the authoritative source.
Goldman Sachs Group, Inc. (GS) reported a strong second quarter and first half of 2018, demonstrating significant year-over-year improvements in key financial metrics.
For the three months ended June 2018, net earnings rose 40% to $2.57 billiona, with diluted EPS increasing 51% to $5.98. This performance was driven by robust net revenue growth of 19% across all business segments, notably in Institutional Client Services due to strong Fixed Income, Currency and Commodities (FICC) Client Execution, and in Investing & Lending, bolstered by higher net interest income and gains from equity securities. For the six months ended June 2018, net earnings increased 32% to $5.40 billion, with diluted EPS up 42% to $12.93, reflecting a 22% increase in net revenues across all segments.
Operating expenses also increased by 14%b and 17% for the respective periods, primarily due to higher non-compensation expenses, including provisions for litigation and regulatory proceedings, and investments in growth. Despite rising expenses, the firm maintained healthy profitability with an annualized Return on Average Common Shareholders' Equity (ROE) of 12.8% for Q2 2018, up from 8.7% in the prior year. Capital ratios remained strong, with the Common Equity Tier 1 (CET1) ratio at 12.6% under the Standardized approach as of June 2018.
02—Key points
Key Highlights
- Net earnings for Q2 2018 increased 40% year-over-year to $2.57 billion, with diluted EPS up 51% to $5.98.
- Net revenues grew 19% to $9.40 billion in Q2 2018, driven by strong performance across all business segments, particularly Institutional Client Services and Investing & Lending.
- For the first half of 2018, net earnings were $5.40 billion, a 32% increase year-over-year, with diluted EPS up 42% to $12.93.
- Annualized Return on Average Common Shareholders' Equity (ROE) improved to 12.8% in Q2 2018 from 8.7% in Q2 2017.
- Operating expenses increased by 14% in Q2 2018, driven by higher non-compensation expenses including litigation provisions and growth investments.
- Common Equity Tier 1 (CET1) ratio remained strong at 12.6% (Standardized approach) as of June 2018.
- Book value per common share increased 4.1% from the prior quarter to $194.37 as of June 2018.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2018filed August 3, 2018Financial Statements
Q2 FY2018 against Q2 FY2017
| Line item | Q2 FY2018Q2 FY2017 | Change |
|---|---|---|
| Interest Expense | $3.92B$2.43B | +61.1% |
| Net Income | $2.56B$1.83B | +40.1% |
| EPS (Basic) | $6.04$4.00 | +51.0% |
| EPS (Diluted) | $5.98$3.95 | +51.4% |
| Shares Outstanding (Basic) | 387.80M406.10M | −4.5% |
| Shares Outstanding (Diluted) | 392.60M413.30M | −5.0% |
05—Questions
Frequently Asked Questions
What were the primary drivers of revenue growth in Q2 2018?
Revenue growth in Q2 2018 was driven by increases across all segments. Institutional Client Services saw higher net revenues due to significantly improved performance in Fixed Income, Currency and Commodities (FICC) Client Execution. Investing & Lending benefited from higher net interest income and gains from equity securities. Investment Management saw higher incentive fees, and Investment Banking experienced strong revenues in both Financial Advisory and Underwriting.
How did operating expenses change in Q2 2018 compared to the prior year?
Operating expenses increased by 14% to $6.13 billion in Q2 2018 compared to Q2 2017. This increase was primarily driven by higher non-compensation expenses, which included higher net provisions for litigation and regulatory proceedings, as well as investments in growth and increased client activity. Compensation and benefits also increased by 7%, reflecting higher net revenues.
What is the firm's capital position as indicated by the report?
Goldman Sachs maintained a strong capital position. As of June 2018, the Common Equity Tier 1 (CET1) ratio was 12.6% under the Standardized approach and 11.5% under the Basel III Advanced approach. Book value per common share was $194.37 as of June 2018, a 4.1% increase from the prior quarter.
How did the firm perform in the first half of 2018 compared to the first half of 2017?
For the first half of 2018, Goldman Sachs reported net earnings of $5.40 billion, an increase of 32% compared to $4.09 billion in the first half of 2017. Diluted earnings per common share rose 42% to $12.93. Net revenues increased by 22% to $19.44 billion, also reflecting growth across all segments.
06—Continue