Goldman Sachs quarterly profit surges 80 pct 

Goldman Sachs quarterly profit surges 80 pct 

Goldman Sachs quarterly profit surges 80 pct 

The FINANCIAL -- The Goldman Sachs Group, Inc. on April 18 reported net revenues of $8.03 billion and net earnings of $2.26 billion for the first quarter ended March 31, 2017.

Diluted earnings per common share were $5.15 compared with $2.68 for the first quarter of 2016 and $5.08 for the fourth quarter of 2016. Annualized return on average common shareholders’ equity (ROE) was 11.4% for the first quarter of 2017, according to Goldman Sachs.

Highlights

Goldman Sachs ranked first in worldwide announced mergers and acquisitions for the year-to- date. 

The firm also ranked first in worldwide equity and equity-related offerings and common stock offerings for the year-to-date. 

Investing & Lending generated net revenues of $666 million from debt securities and loans, its highest quarterly performance in nearly four years.

Book value per common share increased by 1.4% during the quarter to $184.98.

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 14.2% and 12.9%, respectively, and the firm’s global core liquid assets were $222 billion as of March 31, 2017.

“The operating environment was mixed, with client activity challenged in certain market-making businesses and a more attractive backdrop for underwriting in our investment banking franchise,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “As the economy improves, we are well- positioned to not only meet our clients’ diverse needs, but also to generate operating leverage for our shareholders.”

Investment Banking

Net revenues in Investment Banking were $1.70 billion for the first quarter of 2017, 16% higher than the first quarter of 2016 and 15% higher than the fourth quarter of 2016. Net revenues in Financial Advisory were $756 million, 2% lower than the first quarter of 2016. Industry-wide completed mergers and acquisitions activity levels declined compared with the same prior year period. Net revenues in Underwriting were $947 million, 37% higher than the first quarter of 2016, due to significantly higher net revenues in equity underwriting, reflecting an increase in industry-wide activity, and significantly higher net revenues in debt underwriting, reflecting an increase in industry-wide leveraged finance activity. The firm’s investment banking transaction backlog decreased compared with both the end of 2016 and the end of the first quarter of 2016.

Institutional Client Services

Net revenues in Institutional Client Services were $3.36 billion for the first quarter of 2017, 2% lower than the first quarter of 2016 and 7% lower than the fourth quarter of 2016.

Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.69 billion for the first quarter of 2017, essentially unchanged compared with the first quarter of 2016, reflecting significantly higher net revenues in mortgages and higher net revenues in interest rate products, offset by significantly lower net revenues in commodities and currencies and lower net revenues in credit products. During the quarter, Fixed Income, Currency and Commodities Client Execution operated in an environment characterized by political uncertainty, low levels of volatility and low client activity levels.

Net revenues in Equities were $1.67 billion for the first quarter of 2017, 6% lower than the first quarter of 2016, due to lower net revenues in commissions and fees, reflecting lower volumes in the United States, and lower net revenues in securities services, primarily reflecting the impact of changes in the composition of customer balances. These results were partially offset by higher net revenues in equities client execution, reflecting significantly higher results in derivatives, partially offset by lower results in cash products. Despite global equity prices generally increasing during the quarter, Equities also operated in an environment characterized by political uncertainty, low levels of volatility and low client activity levels.

Investing & Lending

Net revenues in Investing & Lending were $1.46 billion for the first quarter of 2017, significantly higher than the first quarter of 2016 and essentially unchanged compared with the fourth quarter of 2016. The increase in net revenues compared with a weak first quarter of 2016 was primarily due to a significant increase in net gains from investments in both private and public equities, which were positively impacted by corporate performance and an increase in global equity prices. Net revenues in debt securities and loans were also significantly higher compared with the first quarter of 2016, reflecting significantly higher net gains from investments in debt instruments and higher net interest income.

Investment Management

Net revenues in Investment Management were $1.50 billion for the first quarter of 2017, 12% higher than the first quarter of 2016 and 7% lower than the fourth quarter of 2016. The increase in net revenues compared with the first quarter of 2016 was primarily due to higher incentive fees and higher management and other fees. The increase in management and other fees reflected higher average assets under supervision, partially offset by shifts in the mix of client assets and strategies. During the quarter, total assets under supervision decreased $6 billion to $1.37 trillion. Long-term assets under supervision increased $29 billion, including net market appreciation of $24 billion, primarily in equity and fixed income assets, and net inflows of $5 billion, reflecting inflows in fixed income assets. Liquidity products decreased $35 billion.

Expenses

Operating expenses were $5.49 billion for the first quarter of 2017, 15% higher than both the first quarter of 2016 and the fourth quarter of 2016.

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 $3.29 billion for the first quarter of 2017, 24% higher than the first quarter of 2016, reflecting an increase in net revenues. The ratio of compensation and benefits to net revenues for the first quarter of 2017 was 41.0% compared with 42.0% for the first quarter of 2016. Total staff was essentially unchanged during the first quarter of 2017.

Non-Compensation Expenses

Non-compensation expenses were $2.20 billion for the first quarter of 2017, 5% higher than the first quarter of 2016 and 6% lower than the fourth quarter of 2016. The increase compared with the first quarter of 2016 was primarily due to higher other expenses, reflecting higher net provisions for litigation and regulatory proceedings. Brokerage, clearing, exchange and distribution fees were lower compared with the first quarter of 2016, reflecting decreased transaction volumes in Equities.

Net provisions for litigation and regulatory proceedings for the first quarter of 2017 were $139 million compared with $77 million for the first quarter of 2016.

Provision for Taxes

The effective income tax rate for the first quarter of 2017 was 11.2%, down from the full year rate of 28.2% for 2016, primarily due to tax benefits on the settlement of employee share-based awards in accordance with ASU No. 2016-09. The impact of the restricted stock unit deliveries and option exercises in the first quarter of 2017 was a reduction to provision for taxes of $475 million and a reduction in the firm’s effective income tax rate of 18.7 percentage points. This reduction was partially offset by the resolution of certain tax matters in 2016 and non-deductible provisions for litigation and regulatory matters in 2017.

Capital

As of March 31, 2017, total shareholders’ equity was $86.92 billion (common shareholders’ equity of $75.71 billion and preferred stock of $11.20 billion) and unsecured long-term borrowings was $199.37 billion.

The firm’s Standardized Common Equity Tier 1 ratio reflecting the applicable transitional provisions was 14.2% as of March 31, 2017, compared with 14.5% as of December 31, 2016.

The firm’s Basel III Advanced Common Equity Tier 1 ratio reflecting the applicable transitional provisions was 12.9%  as of March 31, 2017, compared with 13.1% as of December 31, 2016.

The firm’s supplementary leverage ratio on a fully phased-in basis was 6.4% as of March 31, 2017, unchanged compared with December 31, 2016.

On April 17, 2017, the Board of Directors of The Goldman Sachs Group, Inc. (Board) increased the firm’s quarterly dividend to $0.75 per common share from $0.65 per common share. The dividend will be paid on June 29, 2017 to common shareholders of record on June 1, 2017.

During the quarter, the firm repurchased 6.2 million shares of its common stock at an average cost per share of $243.22, for a total cost of $1.50 billion. On April 17, 2017, the Board authorized the repurchase of an additional 50.0 million shares of common stock pursuant to the firm’s existing share repurchase program.

Book value per common share was $184.98 and tangible book value per common share was $175.05, both based on basic shares of 409.3 million as of March 31, 2017.

Other Balance Sheet and Liquidity Metrics

Total assets were $894 billion as of March 31, 2017, compared with $860 billion as of December 31, 2016.

The firm’s global core liquid assets were $222 billion as of March 31, 2017 and averaged $218 billion for the first quarter of 2017, compared with an average of $219 billion for the fourth quarter of 2016.

Level 3 assets were $23 billion as of March 31, 2017, unchanged compared with December 31, 2016, and represented 2.6% of total assets.