Thursday, January 19, 2012

Goldman Sachs Earnings Rebound: Up QoQ, Down YoY

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Goldman Sachs Earnings Rebound: Up QoQ, Down YoY

Goldman Sachs Summary Q4 2011 Goldman Sachs Q4 2011 financial results rebounded from the dismal Q3 performance, the worst since the QE November 2008 during the depths of the USA Financial System Crisis. However, results dropped YoY and this is a continuing trend, for 6 of the past 7 quarters now. NonInterest Revenues, which is primarily trading gains and losses plus investment banking income, are driving Net Income and then even less makes it to Earnings per Share. The world's most hated bankers continue to operate a casino with volatile, and downtrending, financial performance. The current Goldman Sachs investment strategy and business plan is wiping out GS common stockholders as very little is trickling down. There was a time in 2009 when GS stock and Apple stock were the same price... Financial position is questionable without the $173.55 billion in unsecured long-term borrowings being counted as capital by Goldman Sachs. We don't count this in our capital adequacy review. Significant uncertainty about Goldman Sachs future financial performance was generated earlier in 2011 and the concern continues.

Goldman Sachs Income Statement Q4 2011 Goldman Sachs reported net revenues of $6.05 billion, a net income of $1.01 billion, and earnings per share of $1.84. From the prior quarter Q3 2011, net revenues were up +68.64%, net income up +357.76%, and earnings per share up +319.05%. From the prior year Q4 2010, these were down -30.00%, -57.56%, and -51.45%, respectively. The operating and net margins increased QoQ and decreased YoY to 20.61% and 16.75%, respectively.

Goldman Sachs Balance Sheet Q4 2011 Total assets decreased QoQ -2.73% to $923 billion. The capital to assets ratio (total stockholders' equity divided by total assets) is a sub par 7.85%. Tier 1 capital (13.8%) and Tier 1 common (12.1%) are adequate. Return on assets decreased to a multi-year low of 0.48%.

Goldman Sachs (GS) Rating Q4 2011 At December 31, 2011, we have rated Goldman Sachs a "G+", down from "F-" at September 30, 2011. Financial position continues sub par, although very slightly strengthening. Financial performance continues below average. Our rating weights financial position more than financial performance and emphasizes safety and soundness, not future earnings potential. Ratings range from A+ down through G-.

Goldman Sachs Financial Performance by the Quarters

Goldman Sachs Earnings per Share Current Earnings per Share of $1.84 are +319.05% QoQ, -51.45% YoY, and a 2-quarter high. The chart average EPS is $3.00.


Goldman Sachs Net Revenues, Operating Income, Net Income Current Net Revenues of $6.05 billion are +68.64% QoQ, -30.00% YoY, and a 2-quarter high. Current Operating Income of $1.25 billion is a 2-quarter high. Current Net Income of $1.01 billion is +357.76% QoQ, -57.56% YoY, and an 2-quarter high. The chart averages for NR, OI, and NI are $8.60 billion, $2.72 billion, and $1.87 billion, respectively.


Goldman Sachs Operating Margin and Net Margin Current Operating Margin of 20.61% is a 2-quarter high. Current Net Margin of 16.75% is also a 2-quarter high. The chart averages for OM and NM are 30.40% and 20.67%, respectively.


Goldman Sachs Return on Assets Current Return on Assets of 0.48% continues the downtrend and is a multi-year low. The chart average for ROA is 1.07%.


Goldman Sachs Income Statement Components Current NonInterest Revenue of $4.98 billion is a 2-quarter high. NonInterest Revenue has been the primary driver of Net Income. Current NonInterest Expense, operating expenses, of $4.80 billion is a 2-quarter high. Current Net Interest Income of $1.07 billion is a 12-quarter low. The chart averages for NIR, NIE, and NII are $7.24 billion, $5.87 billion, and $1.36 billion.


Goldman Sachs Growth Rates Current Net Revenues Growth of -30.00% is the 7th consecutive quarterly decline. Current Earnings per Share Growth of -51.45% is dismal and the 2nd consecutive quarterly decline. The chart averages for NRG and EPSG are -19.08% and -30.20%.


Goldman Sachs Operating Expense Ratio The current Operating Expense Ratio of 59.91% is a 2-quarter low. The OER chart average is 50.82%.


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, as an "orphan month", and not included in a quarterly financial results.


NEW YORK, January 18, 2012 - The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of $28.81 billion and net earnings of $4.44 billion for the year ended December 31, 2011. Diluted earnings per common share were $4.51 compared with $13.18 for the year ended December 31, 2010. Return on average common shareholders’ equity (ROE) was 3.7% for 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 $7.46 and ROE was 5.9% for the year ended December 31, 2011.

Fourth quarter net revenues were $6.05 billion and net earnings were $1.01 billion. Diluted earnings per common share were $1.84 compared with $3.79 for the fourth quarter of 2010 and a diluted loss per common share of $0.84 for the third quarter of 2011. Annualized ROE was 5.8% for the fourth quarter of 2011.

“This past year was dominated by global macro-economic concerns which significantly affected our clients’ risk tolerance and willingness to transact,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “While our results declined as a consequence, I am pleased that the firm retained its industry-leading positions across our global client franchise while prudently managing risk, capital and expenses. As economies and markets improve – and we see encouraging signs of this – Goldman Sachs is very well positioned to perform for our clients and our shareholders.”

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