01—Abstract
Summary
Summary of the 10-Q filed August 5, 2019. Cited figures are marked; the original filing is the authoritative source.
Goldman Sachs Group, Inc. reported net earnings of $2.42 billiona for the second quarter of 2019, a 6% decrease compared to the same period in 2018.
Diluted earnings per share were $5.81b, down 3% year-over-year. The decline in profitability was primarily attributed to lower revenues in Investment Management, driven by significantly lower incentive fees, and a decrease in Investment Banking revenues, particularly in debt underwriting. These impacts were partially offset by stronger performance in the Investing & Lending segment, boosted by higher net gains in public equities and increased net interest income.
Operating expenses remained stable year-over-year, with lower provisions for litigation and regulatory proceedings offset by increased technology and consolidated investment expenses. The firm returned $1.57 billionc in capital to shareholders in the quarter through share repurchases and dividends. Goldman Sachs maintained a strong capital position, with its Common Equity Tier 1 (CET1) capital ratio at 13.8% under the Standardized approach and 13.5% under the Basel III Advanced approach as of June 30, 2019, indicating robust capital adequacy.
02—Key points
Key Highlights
- Net earnings decreased by 6% to $2.42 billion in Q2 2019 compared to Q2 2018.
- Diluted EPS declined by 3% year-over-year to $5.81 for Q2 2019.
- Total net revenues decreased by 2% to $9.46 billion, driven by lower revenues in Investment Management and Investment Banking.
- Investment Management revenue was down 14% due to significantly lower incentive fees.
- Investment Banking revenue decreased by 9%, primarily due to lower debt underwriting revenues.
- Investing & Lending segment saw a 16% increase in net revenues, driven by higher equity investments.
- Operating expenses remained flat year-over-year at $6.12 billion.
- Capital returned to shareholders in Q2 2019 was $1.57 billion, comprising $1.25 billion in share repurchases and $319 million in dividends.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2019filed August 5, 2019Financial Statements
Q2 FY2019 against Q2 FY2018
| Line item | Q2 FY2019Q2 FY2018 | Change |
|---|---|---|
| Interest Expense | $4.69B$3.92B | +19.7% |
| Net Income | $2.42B$2.56B | −5.6% |
| EPS (Basic) | $5.86$6.04 | −3.0% |
| EPS (Diluted) | $5.81$5.98 | −2.8% |
| Shares Outstanding (Basic) | 374.50M387.80M | −3.4% |
| Shares Outstanding (Diluted) | 378.00M392.60M | −3.7% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Goldman Sachs' revenue performance in Q2 2019?
Goldman Sachs' total net revenues decreased by 2% to $9.46 billion in Q2 2019 compared to Q2 2018. This was primarily driven by a 14% decrease in Investment Management revenues, largely due to significantly lower incentive fees, and a 9% decrease in Investment Banking revenues, mainly from lower debt underwriting. These were partially offset by a 16% increase in Investing & Lending revenues, driven by higher gains from equity investments.
How did operating expenses and profitability change year-over-year?
Operating expenses remained stable at $6.12 billion for Q2 2019 compared to Q2 2018. However, net earnings decreased by 6% to $2.42 billion, and diluted EPS fell by 3% to $5.81. The decrease in profitability, despite stable operating expenses, was mainly due to lower revenue generation across key segments.
What is the company's capital position and how did they return capital to shareholders?
Goldman Sachs maintained a strong capital position, with its Common Equity Tier 1 (CET1) capital ratio at 13.8% (Standardized approach) and 13.5% (Basel III Advanced approach) as of June 30, 2019. In the second quarter of 2019, the firm returned $1.57 billion in capital to common shareholders, comprising $1.25 billion in common share repurchases and $319 million in common stock dividends.
Which segments performed well and which faced challenges?
The Investing & Lending segment showed strong performance, with a 16% increase in net revenues, primarily driven by higher net gains from equity investments. Conversely, Investment Management faced challenges, with a 14% revenue decrease due to lower incentive fees, and Investment Banking also saw a revenue decline of 9%, mainly impacted by lower debt underwriting. Institutional Client Services experienced a 3% decrease in net revenues, with FICC Client Execution revenue down 13% due to lower client activity.
06—Continue