Goldman Sachs 2012 Annual Report Download - page 48

Management’s Discussion and Analysis
Net Revenues
2012 versus 2011. Net revenues on the consolidated
statements of earnings were $34.16 billion for 2012, 19%
higher than 2011, reflecting significantly higher other
principal transactions revenues, as well as higher
market-making revenues, investment banking revenues and
investment management revenues compared with 2011.
These increases were partially offset by significantly lower
net interest income and lower commissions and fees
compared with 2011.
2011 versus 2010. Net revenues on the consolidated
statements of earnings were $28.81 billion for 2011, 26%
lower than 2010, reflecting significantly lower other
principal transactions revenues and market-making
revenues, as well as lower investment banking revenues and
net interest income. These decreases were partially offset by
higher commissions and fees compared with 2010.
Investment management revenues were essentially
unchanged compared with 2010.
Non-interest Revenues
Investment banking
During 2012, investment banking revenues reflected an
operating environment generally characterized by
continued concerns about the outlook for the global
economy and political uncertainty. These concerns weighed
on investment banking activity, as completed mergers and
acquisitions activity declined compared with 2011, and
equity and equity-related underwriting activity remained
low, particularly in initial public offerings. However,
industry-wide debt underwriting activity improved
compared with 2011, as credit spreads tightened and
interest rates remained low. If macroeconomic concerns
continue and result in lower levels of client activity,
investment banking revenues would likely be
negatively impacted.
2012 versus 2011. Investment banking revenues on the
consolidated statements of earnings were $4.94 billion for
2012, 13% higher than 2011, reflecting significantly higher
revenues in our underwriting business, due to strong
revenues in debt underwriting. Revenues in debt
underwriting were significantly higher compared with
2011, primarily reflecting higher revenues from
investment-grade and leveraged finance activity. Revenues
in equity underwriting were lower compared with 2011,
primarily reflecting a decline in industry-wide initial public
offerings. Revenues in financial advisory were essentially
unchanged compared with 2011.
2011 versus 2010. Investment banking revenues on the
consolidated statements of earnings were $4.36 billion for
2011, 9% lower than 2010, primarily reflecting lower
revenues in our underwriting business. Revenues in equity
underwriting were significantly lower than 2010,
principally due to a decline in industry-wide activity.
Revenues in debt underwriting were essentially unchanged
compared with 2010. Revenues in financial advisory
decreased slightly compared with 2010.
Investment management
During 2012, investment management revenues reflected
an operating environment generally characterized by
improved asset prices, resulting in appreciation in the value
of client assets. However, the mix of assets under
supervision has shifted slightly from asset classes that
typically generate higher fees to asset classes that typically
generate lower fees compared with 2011. In the future, if
asset prices were to decline, or investors continue to favor
asset classes that typically generate lower fees or investors
continue to withdraw their assets, investment management
revenues would likely be negatively impacted. In addition,
continued concerns about the global economic outlook
could result in downward pressure on assets
under supervision.
2012 versus 2011. Investment management revenues on
the consolidated statements of earnings were $4.97 billion
for 2012, 6% higher compared with 2011, due to
significantly higher incentive fees, partially offset by slightly
lower management and other fees.
2011 versus 2010. Investment management revenues on
the consolidated statements of earnings were $4.69 billion
for 2011, essentially unchanged compared with 2010,
primarily due to higher management and other fees,
reflecting favorable changes in the mix of assets under
management, offset by lower incentive fees.
46 Goldman Sachs 2012 Annual Report