Goldman Sachs 2015 Annual Report Download - page 72

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Investment Banking
Our Investment Banking segment is comprised of:
Financial Advisory. Includes strategic advisory
assignments with respect to mergers and acquisitions,
divestitures, corporate defense activities, restructurings,
spin-offs, risk management and derivative transactions
directly related to these client advisory assignments.
Underwriting. Includes public offerings and private
placements, including local and cross-border transactions
and acquisition financing, of a wide range of securities,
loans and other financial instruments, and derivative
transactions directly related to these client underwriting
activities.
The table below presents the operating results of our
Investment Banking segment.
Year Ended December
$ in millions 2015 2014 2013
Financial Advisory $3,470 $2,474 $1,978
Equity underwriting 1,546 1,750 1,659
Debt underwriting 2,011 2,240 2,367
Total Underwriting 3,557 3,990 4,026
Total net revenues 7,027 6,464 6,004
Operating expenses 3,713 3,688 3,479
Pre-tax earnings $3,314 $2,776 $2,525
The table below presents our financial advisory and
underwriting transaction volumes. 1
Year Ended December
$ in billions 2015 2014 2013
Announced mergers and acquisitions $1,774 $ 973 $ 602
Completed mergers and acquisitions 1,090 661 634
Equity and equity-related offerings 272 78 90
Debt offerings 3251 270 281
1. Source: Thomson Reuters. Announced and completed mergers and
acquisitions volumes are based on full credit to each of the advisors in a
transaction. Equity and equity-related offerings and debt offerings are based
on full credit for single book managers and equal credit for joint book
managers. Transaction volumes may not be indicative of net revenues in a
given period. In addition, transaction volumes for prior periods may vary from
amounts previously reported due to the subsequent withdrawal or a change
in the value of a transaction.
2. Includes Rule 144A and public common stock offerings, convertible offerings
and rights offerings.
3. Includes non-convertible preferred stock, mortgage-backed securities, asset-
backed securities and taxable municipal debt. Includes publicly registered
and Rule 144A issues. Excludes leveraged loans.
2015 versus 2014. Net revenues in Investment Banking
were $7.03 billion for 2015, 9% higher than 2014.
Net revenues in Financial Advisory were $3.47 billion,
40% higher than 2014, reflecting strong client activity,
particularly in the United States. Industry-wide completed
mergers and acquisitions increased significantly compared
with the prior year. Net revenues in Underwriting were
$3.56 billion, 11% lower compared with a strong 2014.
Net revenues in debt underwriting were lower compared
with 2014, reflecting significantly lower leveraged finance
activity. Net revenues in equity underwriting were also
lower, reflecting significantly lower net revenues from
initial public offerings and convertible offerings, partially
offset by significantly higher net revenues from secondary
offerings.
During 2015, Investment Banking operated in an
environment characterized by strong industry-wide mergers
and acquisitions activity. Industry-wide activity in both
debt and equity underwriting declined compared with
2014. In the future, if client activity levels in mergers and
acquisitions decline, or client activity levels in underwriting
continue to decline, net revenues in Investment Banking
would likely be negatively impacted.
Operating expenses were $3.71 billion for 2015, essentially
unchanged compared with 2014. Pre-tax earnings were
$3.31 billion in 2015, 19% higher than 2014.
As of December 2015, our investment banking transaction
backlog was higher compared with the end of 2014,
primarily due to significantly higher estimated net revenues
from potential debt underwriting transactions, principally
related to leveraged finance transactions, and higher
estimated net revenues from potential advisory
transactions, reflecting the continued high level of mergers
and acquisitions activity. Estimated net revenues from
potential equity underwriting transactions were slightly
higher compared with the end of 2014.
60 Goldman Sachs 2015 Form 10-K