10-QPeriod: Q2 FY2019

GOLDMAN SACHS GROUP INC Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 5, 2019For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

Goldman Sachs Group, Inc. reported net earnings of $2.42 billion for the second quarter of 2019, a 6% decrease compared to the same period in 2018. Diluted earnings per share were $5.81, 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 billion 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.

Financial Highlights

36 data points
Beta

Net Income

$2.42B

EPS (Diluted)

$5.81

Total Assets

$944.90B

Cash & Equivalents

$91.09B

Free Cash Flow

$6.59B

Financial Statements
Beta
Interest Expense$4.69B
Net Income$2.42B
EPS (Basic)$5.86
EPS (Diluted)$5.81
Shares Outstanding (Basic)374.50M
Shares Outstanding (Diluted)378.00M

Key Highlights

  • 1Net earnings decreased by 6% to $2.42 billion in Q2 2019 compared to Q2 2018.
  • 2Diluted EPS declined by 3% year-over-year to $5.81 for Q2 2019.
  • 3Total net revenues decreased by 2% to $9.46 billion, driven by lower revenues in Investment Management and Investment Banking.
  • 4Investment Management revenue was down 14% due to significantly lower incentive fees.
  • 5Investment Banking revenue decreased by 9%, primarily due to lower debt underwriting revenues.
  • 6Investing & Lending segment saw a 16% increase in net revenues, driven by higher equity investments.
  • 7Operating expenses remained flat year-over-year at $6.12 billion.
  • 8Capital returned to shareholders in Q2 2019 was $1.57 billion, comprising $1.25 billion in share repurchases and $319 million in dividends.

Frequently Asked Questions

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.

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.

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.

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.