10-QPeriod: Q1 FY2020

GOLDMAN SACHS GROUP INC Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 1, 2020For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

Goldman Sachs Group, Inc. reported financial results for the first quarter of 2020, a period marked by the significant disruption of the COVID-19 pandemic. Net revenues remained largely flat year-over-year at $8.74 billion, impacted by a decline in Asset Management revenues due to market conditions, but bolstered by strong performance in Global Markets and Investment Banking. However, net earnings saw a substantial decrease of 46% to $1.21 billion, resulting in diluted earnings per share of $3.11. The company significantly increased its provision for credit losses to $937 million, reflecting a challenging economic environment and the adoption of the CECL accounting standard. Operating expenses rose by 10% due to higher brokerage, clearing fees, and litigation provisions, leading to a less favorable efficiency ratio. Despite these challenges, the company returned $2.38 billion to shareholders through share repurchases and dividends, and maintained strong capital ratios, though the outlook for the remainder of 2020 is subject to significant uncertainty due to the ongoing pandemic.

Financial Highlights

33 data points
Beta

Net Income

$1.21B

EPS (Diluted)

$3.11

Total Assets

$1.09T

Cash & Equivalents

$105.49B

Free Cash Flow

-$55.87B

Financial Statements
Beta
Interest Expense$3.44B
Net Income$1.21B
EPS (Basic)$3.12
EPS (Diluted)$3.11
Shares Outstanding (Basic)358.00M
Shares Outstanding (Diluted)361.10M

Key Highlights

  • 1Net revenues for Q1 2020 were $8.74 billion, largely flat year-over-year.
  • 2Net earnings decreased by 46% to $1.21 billion, with diluted EPS falling to $3.11.
  • 3Provision for credit losses increased significantly to $937 million, up from $224 million in Q1 2019, reflecting economic uncertainty and CECL adoption.
  • 4Operating expenses increased by 10% to $6.46 billion, resulting in a higher efficiency ratio of 73.9%.
  • 5Global Markets segment showed strong performance with a 28% increase in net revenues, driven by higher client activity and volatility.
  • 6Asset Management segment experienced a significant decline in net revenues, down 105% to a net loss, impacted by market declines in equity and debt investments.
  • 7The company returned $2.38 billion to shareholders in Q1 2020 through share repurchases and dividends.

Frequently Asked Questions

The COVID-19 pandemic significantly impacted Goldman Sachs' financial performance in Q1 2020. While net revenues were relatively stable, net earnings decreased by 46% due to increased provisions for credit losses and higher operating expenses. The pandemic also led to a significant increase in trading activity and volatility in global markets, which benefited the Global Markets segment but negatively impacted Asset Management due to declining asset prices.

The Global Markets segment performed strongly, with net revenues increasing by 28% driven by heightened client activity and market volatility. Investment Banking also saw a 25% increase in net revenues due to higher corporate lending and underwriting activity. In contrast, the Asset Management segment experienced a sharp decline in net revenues, reporting a net loss primarily due to significant market-driven losses in equity and debt investments. Consumer & Wealth Management showed a 21% increase in net revenues.

The provision for credit losses increased substantially from $224 million in Q1 2019 to $937 million in Q1 2020. This increase reflects the challenging economic environment influenced by the COVID-19 pandemic, growth in certain loan portfolios (particularly corporate loans), and the adoption of the Current Expected Credit Losses (CECL) accounting standard, which requires earlier recognition of expected credit losses over the life of a loan.