10-QPeriod: Q1 FY2019

GOLDMAN SACHS GROUP INC Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 6, 2019For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

Goldman Sachs Group, Inc. reported net earnings of $2.25 billion 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 $5.71 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 billion 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 $209.07. The firm operated in a mixed macroeconomic environment with accommodative monetary policies but also persistent concerns about global growth and political uncertainty.

Financial Highlights

35 data points
Beta

Net Income

$2.25B

EPS (Diluted)

$5.71

Total Assets

$925.35B

Cash & Equivalents

$87.88B

Free Cash Flow

-$46.50B

Financial Statements
Beta
Interest Expense$4.38B
Net Income$2.25B
EPS (Basic)$5.73
EPS (Diluted)$5.71
Shares Outstanding (Basic)379.80M
Shares Outstanding (Diluted)382.40M

Key Highlights

  • 1Net earnings decreased by 21% to $2.25 billion in Q1 2019 compared to $2.83 billion in Q1 2018.
  • 2Net revenues declined by 13% to $8.81 billion, primarily due to weaker performance in Institutional Client Services (down 18%) and Investing & Lending (down 14%).
  • 3Provision for credit losses surged to $224 million from $44 million year-over-year, largely attributed to consumer loans.
  • 4Operating expenses were reduced by 11% to $5.86 billion, driven by lower compensation and benefits expenses.
  • 5The firm returned $1.56 billion to common shareholders via share repurchases ($1.25 billion) and dividends ($306 million).
  • 6Common Equity Tier 1 (CET1) capital ratio remained strong at 13.7% (Standardized approach) and 13.4% (Advanced approach).
  • 7Book value per common share increased slightly to $209.07 from $207.36 at the end of 2018.

Frequently Asked Questions

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.

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.

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.

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.