Goldman Sachs 2013 Annual Report Download - page 35

Management’s Discussion and Analysis
Executive Overview
The firm generated net earnings of $8.04 billion for 2013,
compared with $7.48 billion for 2012 and $4.44 billion for
2011. Our diluted earnings per common share were $15.46
for 2013, compared with $14.13 for 2012 and $4.51 for
2011. Return on average common shareholders’ equity
(ROE) 1was 11.0% for 2013, compared with 10.7% for
2012 and 3.7% for 2011.
Book value per common share increased approximately 5%
to $152.48 and tangible book value per common share 2
increased approximately 7% to $143.11 compared with the
end of 2012. 3During the year, the firm repurchased
39.3 million shares of its common stock for a total cost of
$6.17 billion, while maintaining strong capital levels. Our
Tier 1 capital ratio was 16.7% and our Tier 1 common
ratio 4was 14.6% as of December 2013 (in each case under
Basel I and also reflecting the revised market risk regulatory
capital requirements which became effective on
January 1, 2013).
The firm generated net revenues of $34.21 billion for 2013.
These results reflected significantly higher net revenues in
Investment Banking, as well as higher net revenues in
Investing & Lending and Investment Management
compared with 2012. These increases were offset by lower
net revenues in Institutional Client Services compared
with 2012.
An overview of net revenues for each of our business
segments is provided below.
Investment Banking
Net revenues in Investment Banking increased significantly
compared with 2012, reflecting significantly higher net
revenues in Underwriting, due to strong net revenues in
both equity and debt underwriting. Net revenues in equity
underwriting were significantly higher compared with
2012, reflecting an increase in client activity, particularly in
initial public offerings. Net revenues in debt underwriting
were significantly higher compared with 2012, principally
due to leveraged finance activity. Net revenues in Financial
Advisory were essentially unchanged compared with 2012.
Institutional Client Services
Net revenues in Institutional Client Services decreased
compared with 2012, reflecting lower net revenues in both
Fixed Income, Currency and Commodities Client
Execution and Equities.
The decrease in Fixed Income, Currency and Commodities
Client Execution compared with 2012 reflected
significantly lower net revenues in interest rate products
compared with a solid 2012, and significantly lower net
revenues in mortgages compared with a strong 2012. In
addition, net revenues in currencies were slightly lower,
while net revenues in credit products and commodities were
essentially unchanged compared with 2012. Fixed Income,
Currency and Commodities Client Execution operated in a
generally challenging environment during much of 2013, as
macroeconomic concerns and uncertainty led to
challenging market-making conditions and generally lower
levels of activity.
1. See “Results of Operations — Financial Overview” below for further information about our calculation of ROE.
2. 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.
3. In October 2013, Berkshire Hathaway Inc. and certain of its subsidiaries (collectively, Berkshire Hathaway) exercised in full the warrant to purchase shares of the
firm’s common stock, which required net share settlement and resulted in a reduction of approximately 3% to both book value per common share and tangible book
value per common share. See “Equity Capital — Equity Capital Management” below for further information about the Berkshire Hathaway warrant.
4. 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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