10-QPeriod: Q3 FY2018

GOLDMAN SACHS GROUP INC Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 2, 2018For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

Goldman Sachs Group Inc. reported strong financial performance for the third quarter and first nine months of 2018. For the third quarter, net earnings increased by 19% to $2.52 billion, and diluted earnings per share rose by 25% to $6.28, compared to the prior year. This growth was driven by a 4% increase in net revenues to $8.65 billion, fueled by robust performance in Investment Banking and Investment Management. The company saw significant revenue growth across multiple segments in the nine-month period, with net revenues up 16% to $28.08 billion and net earnings increasing by 27% to $7.92 billion. Key drivers included strong performances in Market Making, Net Interest Income, Investment Management, and Investment Banking. Despite a 13% increase in operating expenses, largely due to investments and higher litigation provisions, the firm maintained a healthy pre-tax earnings margin.

Financial Highlights

36 data points
Beta

Net Income

$2.52B

EPS (Diluted)

$6.28

Total Assets

$957.19B

Cash & Equivalents

$118.87B

Free Cash Flow

-$7.51B

Financial Statements
Beta
Interest Expense$4.21B
Net Income$2.52B
EPS (Basic)$6.35
EPS (Diluted)$6.28
Shares Outstanding (Basic)385.40M
Shares Outstanding (Diluted)390.50M

Key Highlights

  • 1Net earnings for Q3 2018 increased 19% year-over-year to $2.52 billion, with diluted EPS up 25% to $6.28.
  • 2Net revenues for Q3 2018 grew 4% to $8.65 billion, driven by stronger Investment Banking and Investment Management segments.
  • 3Nine-month net revenues rose 16% to $28.08 billion, and net earnings increased 27% to $7.92 billion.
  • 4Investment Banking segment revenues increased 10% in Q3 and 11% for the nine-month period, with strong performance in equity underwriting.
  • 5Investment Management revenues grew 11% in Q3 and 16% for the nine-month period, benefiting from higher assets under supervision and incentive fees.
  • 6Operating expenses increased 4% in Q3 and 13% for the nine-month period, largely due to investments in growth and higher litigation provisions.
  • 7Common Equity Tier 1 (CET1) ratios remained strong at 13.1% (Standardized approach) and 12.4% (Advanced approach) as of September 2018.

Frequently Asked Questions

Revenue growth in the third quarter of 2018 was primarily driven by higher net revenues in Investment Banking, particularly in Underwriting (especially equity underwriting) and Financial Advisory, and by increased revenues in Investment Management due to growing assets under supervision. Net interest income also contributed positively.

Operating expenses increased by 4% in the third quarter of 2018 compared to the third quarter of 2017, totaling $5.57 billion. This increase was mainly due to higher non-compensation expenses, including investments in growth and increased provisions for litigation and regulatory proceedings, partially offset by slightly lower compensation and benefits expenses.

Goldman Sachs maintains strong capital ratios. As of September 2018, its Common Equity Tier 1 (CET1) ratio was 13.1% under the Standardized approach and 12.4% under the Basel III Advanced approach. The company also reported a tangible common shareholders' equity of $71.46 billion as of September 2018.

The third quarter of 2018 saw healthy but slowing global GDP growth, with increased uncertainty due to rising global trade tensions and concerns about emerging economies. This environment impacted asset prices and influenced client activity, particularly in market-making and investment banking, which experienced industry-wide decreases in transaction volumes compared to the prior quarter.