• July 17, 2017
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Goldman Sachs releases Q2 2017 results

The Goldman Sachs Group, Inc. reported net revenues of $7.89 billion and net earnings of $1.83 billion for the second quarter ended June 30, 2017. Diluted earnings per common share were $3.95 compared with $3.72 for the second quarter of 2016 and $5.15 for the first quarter of 2017. Annualized return on average common shareholders’ equity (ROE) was 8.7% for the second quarter of 2017 and 10.1% for the first half of 2017.

• Goldman Sachs reported first half net revenues of $15.91 billion, 12% higher than the first half of 2016, which contributed to a 340 basis point improvement in pre-tax margin to 31.7%.
• The firm ranked first in worldwide announced and completed mergers and acquisitions for the year-to-date. The firm also ranked first in worldwide common stock offerings for the year-to-date.
• Debt underwriting produced its third highest quarterly performance with net revenues of $721 million.
•  Equities generated its highest quarterly results in two years with net revenues of $1.89 billion, an increase of 13% compared with the first quarter of 2017.
• Investment Management generated record quarterly management and other fees of $1.28 billion, as assets under supervision increased to a record $1.41 trillion.
• The firm returned nearly $7 billion of capital to common shareholders during the past year. Book value per common share increased by 6.1% from a year ago, including 1.3% during the quarter, to $187.32.
• The firm maintained strong capital ratios and liquidity. The firm’s Common Equity Tier 1 ratio as calculated in accordance with the Standardized approach and the Basel III Advanced approach was 13.9% and 12.5%, respectively, and the firm’s global core liquid assets were $221 billion as of June 30, 2017.

“A mixed operating environment persisted into the second quarter as conditions continued to support underwriting and M&A, while constraining certain market-making activity,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “Against that backdrop, we produced revenue growth and improved profitability for the first half of 2017, reflecting both the diversity and strength of our global businesses.”

Net Revenues

Investment Banking

Net revenues in Investment Banking were $1.73 billion for the second quarter of 2017, 3% lower than the second quarter of 2016 and 2% higher than the first quarter of 2017. Net revenues in Financial Advisory were $749 million, 6% lower than the second quarter of 2016, reflecting a decrease in industry-wide completed mergers and acquisitions.

Net revenues in Underwriting were $981 million, essentially unchanged compared with the second quarter of 2016. Net revenues in debt underwriting were essentially unchanged compared with a strong prior year period. Net revenues in equity underwriting were slightly lower, reflecting lower net revenues from convertibles. The firm’s investment banking transaction backlog increased compared with both the end of the first quarter of 2017 and the end of 2016.

Institutional Client Services

Net revenues in Institutional Client Services were $3.05 billion for the second quarter of 2017, 17% lower than the second quarter of 2016 and 9% lower than the first quarter of 2017. Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.16 billion for the second quarter of 2017, 40% lower than the second quarter of 2016, due to significantly lower net revenues in interest rate products, commodities, credit products and currencies, partially offset by higher net revenues in mortgages.

During the quarter, Fixed Income, Currency and Commodities Client Execution operated in a challenging environment characterized by low levels of volatility, low client activity and generally difficult market-making conditions. Net revenues in Equities were $1.89 billion for the second quarter of 2017, 8% higher than the second quarter of 2016, primarily due to higher net revenues in equities client execution, reflecting higher results in both cash products and derivatives.

Net revenues from securities services and commissions and fees were both slightly higher compared with the second quarter of 2016. During the quarter, Equities operated in an environment characterized by generally higher global equity prices, while volatility levels remained low.

Investing & Lending

Net revenues in Investing & Lending were $1.58 billion for the second quarter of 2017, 42% higher than the second quarter of 2016 and 8% higher than the first quarter of 2017. Net revenues in equity securities were $1.18 billion, 88% higher than the second quarter of 2016, primarily reflecting a significant increase in net gains from private equities, which were positively impacted by corporate performance and company-specific events. Net revenues in debt securities and loans were $396 million, 18% lower than the second quarter of 2016, primarily reflecting lower net gains from investments in debt instruments, partially offset by higher net interest income.

Investment Management

Net revenues in Investment Management were $1.53 billion for the second quarter of 2017, 13% higher than the second quarter of 2016 and 2% higher than the first quarter of 2017. The increase in net revenues compared with the second quarter of 2016 was due to higher management and other fees, primarily reflecting higher average assets under supervision, as well as higher incentive fees and transaction revenues. During the quarter, total assets under supervision increased $33 billion to $1.41 trillion. Long-term assets under supervision increased $42 billion, including net inflows of $25 billion, spread across all asset classes, and net market appreciation of $17 billion, primarily in fixed income and equity assets. Liquidity products decreased $9 billion.

Expenses

Operating expenses were $5.38 billion for the second quarter of 2017, 2% lower than both the second quarter of 2016 and the first quarter of 2017.

Compensation and Benefits

The accrual for compensation and benefits expenses (including salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as benefits) was $3.23 billion for the second quarter of 2017, 3% lower than the second quarter of 2016. The ratio of compensation and benefits to net revenues for the first half of 2017 was 41.0%, compared with 42.0% for the first half of 2016. Total staff was unchanged compared with the end of the first quarter of 2017.

Non-Compensation Expenses

Non-compensation expenses were $2.15 billion for the second quarter of 2017, essentially unchanged compared with the second quarter of 2016 and 2% lower than the first quarter of 2017. Noncompensation expenses for the second quarter of 2017 included higher brokerage, clearing, exchange and distribution fees, higher market development expenses and higher depreciation and amortization expenses compared with the second quarter of 2016. These increases were offset by lower other expenses, reflecting lower net provisions for litigation and regulatory proceedings. Net provisions for litigation and regulatory proceedings for the second quarter of 2017 were $22 million compared with $126 million for the second quarter of 2016.

Provision for Taxes

The effective income tax rate for the first half of 2017 increased to 19.1% from 11.2% for the first quarter of 2017, primarily due to a decrease in the impact of tax benefits from the settlement of employee share-based awards in the first quarter of 2017.

Re-disseminated by The Asian Banker