01—Abstract
Summary
Summary of the 10-Q filed May 6, 2019. Cited figures are marked; the original filing is the authoritative source.
Goldman Sachs Group, Inc. reported net earnings of $2.25 billiona for the first quarter of 2019, a 21% decrease compared to $2.83 billion in the first quarter of 2018.
Diluted earnings per share also declined to $5.71b from $6.95 year-over-year. This downturn was primarily driven by a 13% decrease in net revenues to $8.81 billion, largely due to lower performance in Institutional Client Services and Investing & Lending segments. While operating expenses decreased by 11% to $5.86 billion, the provision for credit losses increased significantly to $224 million from $44 million, mainly related to consumer loans.
Despite the decline in earnings, the company returned $1.56 billionc to shareholders through share repurchases and dividends. The firm maintained strong capital ratios, with a Common Equity Tier 1 (CET1) capital ratio of 13.7% under the Standardized approach.
Book value per common share saw a slight increase to $209.07d. The firm operated in a mixed macroeconomic environment with accommodative monetary policies but also persistent concerns about global growth and political uncertainty.
02—Key points
Key Highlights
- Net earnings decreased by 21% to $2.25 billion in Q1 2019 compared to $2.83 billion in Q1 2018.
- Net revenues declined by 13% to $8.81 billion, primarily due to weaker performance in Institutional Client Services (down 18%) and Investing & Lending (down 14%).
- Provision for credit losses surged to $224 million from $44 million year-over-year, largely attributed to consumer loans.
- Operating expenses were reduced by 11% to $5.86 billion, driven by lower compensation and benefits expenses.
- The firm returned $1.56 billion to common shareholders via share repurchases ($1.25 billion) and dividends ($306 million).
- Common Equity Tier 1 (CET1) capital ratio remained strong at 13.7% (Standardized approach) and 13.4% (Advanced approach).
- Book value per common share increased slightly to $209.07 from $207.36 at the end of 2018.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed May 6, 2019Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Interest Expense | $4.38B$3.31B | +32.2% |
| Net Income | $2.25B$2.83B | −20.5% |
| EPS (Basic) | $5.73$7.02 | −18.4% |
| EPS (Diluted) | $5.71$6.95 | −17.8% |
| Shares Outstanding (Basic) | 379.80M389.10M | −2.4% |
| Shares Outstanding (Diluted) | 382.40M393.80M | −2.9% |
05—Questions
Frequently Asked Questions
What were the primary drivers of the decrease in net earnings?
The primary drivers of the decrease in net earnings were significantly lower net revenues in Institutional Client Services and Investing & Lending segments. This was primarily due to lower net revenues in equities and fixed income, currency, and commodities (FICC) client execution, as well as lower net gains from equity securities investments. Additionally, a substantial increase in the provision for credit losses, mainly related to consumer loans, also contributed to the decline.
How did the firm manage its expenses during the quarter?
Goldman Sachs managed its expenses by reducing total operating expenses by 11% to $5.86 billion compared to the first quarter of 2018. This reduction was primarily achieved through significantly lower compensation and benefits expenses, reflecting the decline in operating performance. Brokerage, clearing, exchange, and distribution fees also decreased due to lower activity levels.
What is the firm's capital position as of March 31, 2019?
The firm maintained a strong capital position. As of March 31, 2019, the Common Equity Tier 1 (CET1) capital ratio was 13.7% under the Standardized approach and 13.4% under the Basel III Advanced approach. The book value per common share was $209.07, an increase from $207.36 at the end of 2018.
How did the different business segments perform compared to the previous year?
Investment Banking revenues were largely unchanged year-over-year. Institutional Client Services saw an 18% decrease in net revenues, primarily driven by lower FICC and Equities client execution. Investing & Lending net revenues decreased by 14%, with lower gains from private equity and debt instruments. Investment Management revenues declined by 12%, largely due to lower incentive fees and transaction revenues.
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