01—Abstract
Summary
Summary of the 10-Q filed November 2, 2018. Cited figures are marked; the original filing is the authoritative source.
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 billiona, 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%b increase in operating expenses, largely due to investments and higher litigation provisions, the firm maintained a healthy pre-tax earnings margin.
02—Key points
Key Highlights
- Net earnings for Q3 2018 increased 19% year-over-year to $2.52 billion, with diluted EPS up 25% to $6.28.
- Net revenues for Q3 2018 grew 4% to $8.65 billion, driven by stronger Investment Banking and Investment Management segments.
- Nine-month net revenues rose 16% to $28.08 billion, and net earnings increased 27% to $7.92 billion.
- Investment Banking segment revenues increased 10% in Q3 and 11% for the nine-month period, with strong performance in equity underwriting.
- Investment Management revenues grew 11% in Q3 and 16% for the nine-month period, benefiting from higher assets under supervision and incentive fees.
- Operating expenses increased 4% in Q3 and 13% for the nine-month period, largely due to investments in growth and higher litigation provisions.
- Common Equity Tier 1 (CET1) ratios remained strong at 13.1% (Standardized approach) and 12.4% (Advanced approach) as of September 2018.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2018filed November 2, 2018Financial Statements
Q3 FY2018 against Q3 FY2017
| Line item | Q3 FY2018Q3 FY2017 | Change |
|---|---|---|
| Interest Expense | $4.21B$2.68B | +56.8% |
| Net Income | $2.52B$2.13B | +18.6% |
| EPS (Basic) | $6.35$5.09 | +24.8% |
| EPS (Diluted) | $6.28$5.02 | +25.1% |
| Shares Outstanding (Basic) | 385.40M398.20M | −3.2% |
| Shares Outstanding (Diluted) | 390.50M405.70M | −3.7% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in the third quarter of 2018?
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.
How did operating expenses change compared to the previous year?
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.
What is the company's capital position and how is it measured?
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.
What impact did the global business environment have on Goldman Sachs' operations?
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.
06—Continue