Goldman Sachs 2012 Annual Report Download - page 50

Management’s Discussion and Analysis
Net Interest Income
2012 versus 2011. Net interest income on the
consolidated statements of earnings was $3.88 billion for
2012, 25% lower than 2011. The decrease compared
with 2011 was primarily due to lower average yields on
financial instruments owned, at fair value, and
collateralized agreements.
2011 versus 2010. Net interest income on the consolidated
statements of earnings was $5.19 billion for 2011, 6%
lower than 2010. The decrease compared with 2010 was
primarily due to higher interest expense related to our
long-term borrowings and higher dividend expense related
to financial instruments sold, but not yet purchased,
partially offset by an increase in interest income from higher
yielding collateralized agreements.
Operating Expenses
Our operating expenses are primarily influenced by
compensation, headcount and levels of business activity.
Compensation and benefits includes salaries, discretionary
compensation, amortization of equity awards and other
items such as benefits. Discretionary compensation is
significantly impacted by, among other factors, the level of
net revenues, overall financial performance, prevailing labor
markets, business mix, the structure of our share-based
compensation programs and the external environment.
In the context of more difficult economic and financial
conditions, the firm launched an initiative during the
second quarter of 2011 to identify areas where we can
operate more efficiently and reduce our operating expenses.
During 2012 and 2011, we announced targeted annual run
rate compensation and non-compensation reductions of
approximately $1.9 billion in aggregate.
The table below presents our operating expenses and
total staff.
Year Ended December
$ in millions 2012 2011 2010
Compensation and benefits $12,944 $12,223 $15,376
U.K. bank payroll tax —— 465
Brokerage, clearing, exchange and distribution fees 2,208 2,463 2,281
Market development 509 640 530
Communications and technology 782 828 758
Depreciation and amortization 1,738 1,865 1,889
Occupancy 875 1,030 1,086
Professional fees 867 992 927
Insurance reserves 1598 529 398
Other expenses 2,435 2,072 2,559
Total non-compensation expenses 10,012 10,419 10,428
Total operating expenses $22,956 $22,642 $26,269
Total staff at period-end 232,400 33,300 35,700
1. Related revenues are included in “Market making” on the consolidated statements of earnings.
2. Includes employees, consultants and temporary staff.
48 Goldman Sachs 2012 Annual Report