Tuesday, April 19, 2011

Goldman Sachs Reports Improved Q1 Earnings (Financial Charts, Review) *Preferred dividends, redemption pull down EPS* GS

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Goldman Sachs reported Q1 2011 financial results on April 19, 2011
Charts and commentary have been updated for Goldman Sachs Q1 March 2011 financial results *

Goldman Sachs Reports Improved Q1 Earnings

Goldman Sachs Summary Q1 2011 Goldman Sachs Q1 2011 financial results were improved and at a 4-quarter high, although earnings per share dropped to $1.56. The EPS drop was attributable to the $1.64 billion preferred dividend and related redemption of these preferred shares. Financial position is adequate. Presumably better quarters are ahead in 2011 for Goldman Sachs.

Goldman Sachs Income Statement Q1 2011 Goldman Sachs reported total revenues of $11.9B, net income of $2.7B, and earnings per share of $1.56. From the prior quarter Q4 2010, net revenues were up +37.63%, net income up +14.58%, and earnings per share down -58.84%. From the prior year Q1 2010, these were down -6.90%, -20.86%, and -72.09%, respectively. The operating and net margins decreased to 33.97% and 22.99%, respectively, which continue very good.

Goldman Sachs Balance Sheet Q1 2011 Total assets increased QoQ +2.4% to $933B. The capital to assets ratio (total stockholders' equity divided by total assets) is an adequate 7.77%, but is the lowest since Q3 2009. Tier 1 capital dropped to 14.60 % from 16.60%, but continues adequate.

Goldman Sachs Financial Performance by the Quarters (Charts)

Goldman Sachs Earnings per Share (Chart) Below is a chart of quarterly earnings per diluted share. After the plunge to -$4.97 in November 2008 during the USA Financial System Crisis, Goldman Sachs rebounded to a peak of $8.20 in December 2009, but has generally downtrended since. Earnings per share have been positive since the November 2008 plunge, for 9 consecutive quarters, but have been volatile and erratic. The current earnings per share of $1.56 is both a QoQ and YoY decrease.

Goldman Sachs Net Revenues, Operating Income, Net Income (Chart) Below is a chart of quarterly net revenues, operating income, and net income. Consolidated revenues are reported net of interest expense. Net Revenues have been volatile, peaked in June 2009 at $13.7B, were below $10B for 3 consecutive quarters, and are now at a 4-quarter high of $11.9B . Operating Income of $4.0B is at a 4-quarter high, but is still below amounts in the 2009 quarters. Net Income is at a 4-quarter high, but is still below amounts in the 2009 quarters.

Goldman Sachs Operating Margin and Net Margin (Chart) Below is a chart of quarterly operating margin and net margin. Both have been volatile because of the fluctuations in net revenues, operating income, and net income. The margins of 16.38% and 6.93% in June 2010 were the lowest since the loss incurred in November 2008. The margins have rebounded the past 3 quarters.

Goldman Sachs Return on Assets (Chart) Below is a chart of annual return on average assets per quarter. The total net income for the most recent 4 quarters is divided into average assets for the most recent 4 quarters to obtain a rolling annualized ROA, an annualized return on average assets for the 12 months (4 quarters) ended. The trend is obvious, ROA has decreased for 4 consecutive quarters as performance in 2010 quarters has not been as good as the 2009 quarters.

Goldman Sachs Income Statement Components (Chart) Below is a chart of the major income statement components: NonInterest Revenue, Net Interest Income, NonInterest Expense, and Net Income. NonInterest Revenue has been incredibly volatile with large swings upwards or downwards which have ultimately affected Net Income either positively or negatively. NonInterest Revenue is not recovering sufficiently and has become a drag on Net Revenues and ultimately Net Income. Net Interest Income has increased some, but not enough to significantly improve Net Income. NonInterest Expense, operating expenses, of $7.9B is at a 7-quarter high and of some concern. Net Income is reviewed on previous charts above.

Goldman Sachs Growth Rates (Chart) Below is a chart of the quarterly (QoQ, Q/Q, quarterly change) growth rates for net revenues and earnings per share. Net revenues and earnings per share have been volatile and erratic. The initial plunge in November 2008 for net revenues and earnings per share was -126% and -375%. This was followed by a continuing plunge in March 2009 for net revenues and earnings per share of -697% and -168%. Goldman Sachs has bounced back from the 2008 Financial Crisis, but improvement was subdued in the latter part of 2010 and has not been consistent overall.

Goldman Sachs Operating Expense Ratio (Chart) Below is a chart of the operating expense ratio (NonInterest Expense divided by Total Revenues which are NonInterest Income and Interest Income). Operating expenses had appeared contained under 50%, until current quarter Q1 2011 which are 57.57%. This is a negative development. An unreasonable share of each dollar of revenues is being spent on operating expenses. Though still a rather high ratio historically, the ratio peaked in June 2010 at an astronomical 70.25%. Ultimately a continuation of this uptrend will decrease profitability and already has.

* Change in Accounting Periods The Goldman Sachs Group, Inc. (GS) changed from a fiscal year to a calendar year at the end of 2008 when the conversion to a bank holding company occurred. As a result, a fiscal quarter 3ME 11-30-08 was reported and the next quarter reported subsequently was the 3ME 3-31-09. The 1ME 12-26-08 was reported separately and not included in a quarterly financial results.

Goldman Sachs Reports First Quarter Earnings per Common Share of $1.56

New York, NY, April 19, 2011 - The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of $11.89 billion and net earnings of $2.74 billion for the first quarter ended March 31, 2011. Diluted earnings per common share were $1.56 compared with $5.59 for the first quarter of 2010 and $3.79 for the fourth quarter of 2010. Annualized return on average common shareholders’ equity (ROE) (2) was 12.2% for the first quarter of 2011.

Excluding the preferred dividend of $1.64 billion related to the redemption of the firm’s Series G Preferred Stock, diluted earnings per common share were $4.38 (1) and annualized ROE was 14.5%(1) for the first quarter of 2011.

“We are pleased with our first quarter results,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “Generally improving market and economic conditions, coupled with our strong client franchise, produced solid results. Looking ahead, we continue to see encouraging indications for economic activity globally.”

About Goldman Sachs

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

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