« Previous | Next » | All Messages |  GS Message Board Home | recommend post |  Ignore Poster

GS News Goldman Sachs Reports First Quarter Record Earnings Per Common Share of $6.67

NEW YORK--(BUSINESS WIRE)--The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of $12.73 billion and net earnings of $3.20 billion for its first quarter ended February 23, 2007. Diluted earnings per common share were $6.67 compared with $5.08 for the first quarter of 2006 and $6.59 for the fourth quarter of 2006. Annualized return on average tangible common shareholders’ equity ⁽¹⁾ was 44.7% and annualized return on average common shareholders’ equity was 38.0% for the first quarter of 2007.

                         Business Highlights

• Goldman Sachs generated record quarterly net revenues, net earnings and diluted earnings per common share.
• Investment Banking produced record quarterly net revenues of $1.72 billion, including record results in Financial Advisory and Debt Underwriting.
• The firm continued its leadership in worldwide mergers and acquisitions, ranking first in announced transactions for the fiscal year-to-date. ⁽²⁾
• Fixed Income, Currency and Commodities (FICC) generated record quarterly net revenues of $4.60 billion, reflecting strong performance across all major businesses.
• Equities produced record quarterly net revenues of $3.09 billion, 26% higher than the previous record set in the first quarter of 2006, reflecting strength across all major businesses.
• Asset Management generated net revenues of $1.07 billion, including record management and other fees of $982 million. Assets under management increased 26% from a year ago to a record $719 billion, with net asset inflows of $35 billion during the quarter.

                            -------------- 

“We are very pleased with our first quarter's results. They are a product of strong client activity across every region and every segment of our business,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “While market conditions will regularly shift, we are confident that our client-driven strategy will continue to produce the strongest results for the firm.”

                              Net RevenuesInvestment Banking------------------

Net revenues in Investment Banking were $1.72 billion, 17% higher than the first quarter of 2006 and 28% higher than the fourth quarter of 2006. Net revenues in Financial Advisory were $861 million, 17% higher than the first quarter of 2006, primarily reflecting growth in industry-wide completed mergers and acquisitions. Net revenues in the firm’s Underwriting business were $855 million, 16% higher than the first quarter of 2006, reflecting significantly higher net revenues in debt underwriting, primarily due to an increase in leveraged finance activity, as the financing environment remained favorable. The firm’s investment banking backlog increased during the quarter. ⁽³⁾

Trading and Principal Investments---------------------------------

Net revenues in Trading and Principal Investments were $9.42 billion, 35% higher than the first quarter of 2006 and 42% higher than the fourth quarter of 2006.

Net revenues in FICC were $4.60 billion, 20% higher than the first quarter of 2006, reflecting higher net revenues in credit products and mortgages. Net revenues in commodities and interest rate products were strong, but essentially unchanged from the same prior year period. Net revenues in currencies were also strong, but lower compared with the first quarter of 2006. During the quarter, FICC operated in an environment characterized by strong customer-driven activity and favorable market opportunities. In addition, although the subprime sector within the mortgage market experienced significant weakness, the broader credit environment remained strong.

Net revenues in Equities were $3.09 billion, 26% higher than the first quarter of 2006, primarily due to significantly higher net revenues in shares and principal strategies, reflecting strong results across all regions. Net revenues in derivatives were also strong, but essentially unchanged compared with the first quarter of 2006. During the quarter, Equities operated in an environment characterized by rising equity prices, strong customer-driven activity and favorable market opportunities.

Principal Investments recorded net revenues of $1.73 billion, reflecting gains and overrides from corporate and real estate principal investments, including a $227 million gain related to the firm's investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC) and a $161 million gain related to the firm's investment in the convertible preferred stock of Sumitomo Mitsui Financial Group, Inc. (SMFG). Net revenues in Principal Investments included approximately $500 million in gains in the first quarter of 2007 related to the firm's adoption of SFAS No. 157.

Asset Management and Securities Services----------------------------------------

Net revenues in Asset Management and Securities Services were $1.60 billion, 19% lower than the first quarter of 2006 and 12% higher than the fourth quarter of 2006.

Asset Management net revenues were $1.07 billion, 28% lower than the first quarter of 2006, reflecting significantly lower incentive fees, partially offset by a 31% increase in management and other fees. Incentive fees were $90 million for the first quarter of 2007 compared with $739 million for the same prior year period. During the quarter, assets under management increased $43 billion to $719 billion, reflecting non-money market net asset inflows of $24 billion, primarily in equity and fixed income assets, money market net asset inflows of $11 billion and market appreciation of $8 billion in equity and fixed income assets.

Securities Services net revenues were $525 million, 7% higher than the first quarter of 2006, as the firm’s prime brokerage business generated strong results, reflecting continued growth in customer balances in securities lending and margin lending.

                           Expenses

Operating expenses were $7.87 billion, 17% higher than the first quarter of 2006 and 78% higher than the fourth quarter of 2006.

Compensation and Benefits-------------------------

Compensation and benefits expenses were $6.11 billion, 15% higher than the first quarter of 2006, reflecting the impact of higher net revenues. The ratio of compensation and benefits to net revenues was 48.0% for the quarter compared with 50.9% for the first quarter of 2006. Employment levels increased 2% during the quarter.

Non-Compensation Expenses-------------------------

Non-compensation expenses were $1.76 billion, 23% higher than the first quarter of 2006. Excluding non-compensation expenses related to consolidated entities held for investment purposes ⁽⁴⁾, non-compensation expenses were 26% higher than the first quarter of 2006, primarily due to higher brokerage, clearing, exchange and distribution fees, reflecting higher transaction volumes in Equities, and increased professional fees, reflecting increased levels of business activity. Other expenses also increased, primarily due to growth in the firm’s insurance business.

Provision For Taxes-------------------

The effective income tax rate for the first quarter of 2007 was 34.2%, down from 34.5% for fiscal year 2006 and up from 32.8% for the first quarter of 2006. The increase from the first quarter of 2006 was primarily due to a reduction in the impact of permanent benefits due to higher levels of earnings, and changes in the geographic mix of earnings.

                              Capital

As of February 23, 2007, total capital was $169.63 billion, consisting of $36.90 billion in total shareholders’ equity (common shareholders’ equity of $33.80 billion and preferred stock of $3.10 billion) and $132.73 billion in unsecured long-term borrowings. Book value per common share was $77.12 and tangible book value per common share was $65.74 ⁽¹⁾, an increase of 6% and 7%, respectively, compared with the end of 2006. Book value and tangible book value per common share are based on common shares outstanding, including restricted stock units granted to employees with no future service requirements, of 438.3 million at period end.

The firm repurchased 13.0 million shares of its common stock at an average price of $207.26 per share, for a total cost of $2.69 billion during the quarter. The remaining share authorization under the firm’s existing common stock repurchase program is 39.6 million shares.

                               Dividends

The Board of Directors of The Goldman Sachs Group, Inc. (the Board) declared a dividend of $0.35 per common share to be paid on May 24, 2007 to common shareholders of record on April 24, 2007. The Board also declared dividends of $369.15, $387.50, $369.15 and $364.31 per share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, respectively (represented by depositary shares, each representing a 1/1000th interest in a share of preferred stock), to be paid on May 10, 2007 to preferred shareholders of record on April 25, 2007.

                              --------------

Goldman Sachs is a leading global investment banking, securities and investment management firm that provides a wide range of services worldwide to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. Founded in 1869, it is one of the oldest and largest investment banking firms. The firm is headquartered in New York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and other major financial centers around the world.

Cautionary Note Regarding Forward-Looking Statements----------------------------------------------------

This press release contains "forward-looking statements." These statements are not historical facts but instead represent only the firm’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the firm’s control. It is possible that the firm’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect the firm’s future results, see "Risk Factors" in Part I, Item 1A of the firm’s Annual Report on Form 10-K for the fiscal year ended November 24, 2006 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the firm’s Annual Report on Form 10-K for the fiscal year ended November 24, 2006.

Statements about the firm’s investment banking transaction backlog also may constitute forward-looking statements. Such statements are subject to the risk that the terms of these transactions may be modified or that they may not be completed at all; therefore, the net revenues, if any, that the firm actually earns from these transactions may differ, possibly materially, from those currently expected. Important factors that could result in a modification of the terms of a transaction or a transaction not being completed include, in the case of underwriting transactions, a decline in general economic conditions, outbreak of hostilities, volatility in the securities markets generally or an adverse development with respect to the issuer of the securities and, in the case of financial advisory transactions, a decline in the securities markets, an adverse development with respect to a party to the transaction or a failure to obtain a required regulatory approval. For a discussion of other important factors that could adversely affect the firm’s investment banking transactions, see "Risk Factors" in Part I, Item 1A of the firm’s Annual Report on Form 10-K for the fiscal year ended November 24, 2006.

Conference Call---------------

A conference call to discuss the firm’s results, outlook and related matters will be held at 11:00 am (ET). The call will be open to the public. Members of the public who would like to listen to the conference call should dial 1-888-281-7154 (U.S. domestic) and 1-706-679-5627 (international). The number should be dialed at least 10 minutes prior to the start of the conference call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the firm’s Web site, www.gs.com/our_firm/investor_relations/. There is no charge to access the call. For those unable to listen to the live broadcast, a replay will be available on the firm’s Web site or by dialing 1-800-642-1687 (U.S. domestic) or 1-706-645-9291 (international) passcode number 1076656, beginning approximately two hours after the event. Please direct any questions regarding obtaining access to the conference call to Goldman Sachs Investor Relations, via e-mail, at gs-investor-relations@gs.com.