10-QPeriod: Q2 FY2018

GOLDMAN SACHS GROUP INC Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 3, 2018For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

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 billion, 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% 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.

Financial Highlights

36 data points
Beta

Net Income

$2.56B

EPS (Diluted)

$5.98

Total Assets

$968.61B

Cash & Equivalents

$131.42B

Free Cash Flow

$6.41B

Financial Statements
Beta
Interest Expense$3.92B
Net Income$2.56B
EPS (Basic)$6.04
EPS (Diluted)$5.98
Shares Outstanding (Basic)387.80M
Shares Outstanding (Diluted)392.60M

Key Highlights

  • 1Net earnings for Q2 2018 increased 40% year-over-year to $2.57 billion, with diluted EPS up 51% to $5.98.
  • 2Net 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.
  • 3For 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.
  • 4Annualized Return on Average Common Shareholders' Equity (ROE) improved to 12.8% in Q2 2018 from 8.7% in Q2 2017.
  • 5Operating expenses increased by 14% in Q2 2018, driven by higher non-compensation expenses including litigation provisions and growth investments.
  • 6Common Equity Tier 1 (CET1) ratio remained strong at 12.6% (Standardized approach) as of June 2018.
  • 7Book value per common share increased 4.1% from the prior quarter to $194.37 as of June 2018.

Frequently Asked Questions

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.

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.

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.

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.