Goldman Sachs 2012 Annual Report Download - page 37

Management’s Discussion and Analysis
Executive Overview
The firm generated net earnings of $7.48 billion for 2012,
compared with $4.44 billion and $8.35 billion for 2011
and 2010, respectively. Our diluted earnings per common
share were $14.13 for 2012, compared with $4.51 1for
2011 and $13.18 2for 2010. Return on average common
shareholders’ equity (ROE) 3was 10.7% for 2012,
compared with 3.7% 1for 2011 and 11.5% 2for 2010.
Book value per common share increased approximately
11% to $144.67 and tangible book value per common
share 4increased approximately 12% to $134.06 compared
with the end of 2011. During the year, the firm repurchased
42.0 million shares of its common stock for a total cost of
$4.64 billion. Our Tier 1 capital ratio under Basel 1 was
16.7% and our Tier 1 common ratio under Basel 1 5was
14.5% as of December 2012.
The firm generated net revenues of $34.16 billion for 2012.
These results reflected significantly higher net revenues in
Investing & Lending, as well as higher net revenues in
Institutional Client Services, Investment Banking and
Investment Management compared with 2011.
An overview of net revenues for each of our business
segments is provided below.
Investment Banking
Net revenues in Investment Banking increased compared
with 2011, reflecting significantly higher net revenues in
our Underwriting business, due to strong net revenues in
debt underwriting. Net revenues in debt underwriting were
significantly higher compared with 2011, primarily
reflecting higher net revenues from investment-grade and
leveraged finance activity. Net revenues in equity
underwriting were lower compared with 2011, primarily
reflecting a decline in industry-wide initial public offerings.
Net revenues in Financial Advisory were essentially
unchanged compared with 2011.
Institutional Client Services
Net revenues in Institutional Client Services increased
compared with 2011, reflecting higher net revenues in Fixed
Income, Currency and Commodities Client Execution.
The increase in Fixed Income, Currency and Commodities
Client Execution compared with 2011 reflected strong net
revenues in mortgages, which were significantly higher
compared with 2011. In addition, net revenues in credit
products and interest rate products were solid and higher
compared with 2011. These increases were partially offset
by significantly lower net revenues in commodities and
slightly lower net revenues in currencies. Although broad
market concerns persisted during 2012, Fixed Income,
Currency and Commodities Client Execution operated in a
generally improved environment characterized by tighter
credit spreads and less challenging market-making
conditions compared with 2011.
1. Excluding the impact of the preferred dividend of $1.64 billion in the first quarter of 2011 (calculated as the difference between the carrying value and the
redemption value of the preferred stock), related to the redemption of our 10% Cumulative Perpetual Preferred Stock, Series G (Series G Preferred Stock) held by
Berkshire Hathaway Inc. and certain of its subsidiaries (collectively, Berkshire Hathaway), diluted earnings per common share were $7.46 and ROE was 5.9% for
2011. We believe that presenting our results for 2011 excluding this dividend is meaningful, as it increases the comparability of period-to-period results. Diluted
earnings per common share and ROE excluding this dividend are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other
companies. See “Results of Operations — Financial Overview” below for further information about our calculation of diluted earnings per common share and ROE
excluding the impact of this dividend.
2. Excluding the impact of the $465 million related to the U.K. bank payroll tax, the $550 million related to the SEC settlement and the $305 million impairment of our
New York Stock Exchange (NYSE) Designated Market Maker (DMM) rights, diluted earnings per common share were $15.22 and ROE was 13.1% for 2010. We
believe that presenting our results for 2010 excluding the impact of these items is meaningful, as it increases the comparability of period-to-period results. Diluted
earnings per common share and ROE excluding these items are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other
companies. See “Results of Operations — Financial Overview” below for further information about our calculation of diluted earnings per common share and ROE
excluding the impact of these items.
3. See “Results of Operations — Financial Overview” below for further information about our calculation of ROE.
4. Tangible book value per common share is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by other companies. See “Equity
Capital — Other Capital Metrics” below for further information about our calculation of tangible book value per common share.
5. Tier 1 common ratio is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by other companies. See “Equity Capital —
Consolidated Regulatory Capital Ratios” below for further information about our Tier 1 common ratio.
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