Goldman Sachs 2004 Annual Report Download - page 5

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Our success in 2004 can be attributed to many factors and
demonstrates the remarkable potential of our firm. Most
importantly, our results reflect the strength of our franchise,
the depth of our client relationships across all of our
businesses and our leading positions in the most important
financial markets around the world. We also benefited
from steps taken in earlier, more difficult years to restructure
certain of our businesses and build for the future.
This year, like many before it, was marked by a number
of rapidly shifting markets. Our ability to navigate these
changes and effectively manage our risks strengthened our
results. As we have remarked before, we cannot control the
environment, but we strive to outperform our peers in all
market environments. We are particularly pleased that our
relative performance was very strong.
It is worth noting that we won’t always be as fortunate
as we were in 2004. But we are energized by the challenge
and optimistic about the future. Our long-term success has
deep roots — in our client relationships, our willingness to
commit capital and to manage risk, our global reach, our
nimbleness and, above all, our people and reputation. It
is the combination of these attributes that enabled us to
serve our clients and to generate attractive returns for our
shareholders in 2004.
Along with people around the world, Goldman Sachs was
stunned by the devastation caused by the earthquake and
subsequent tsunamis in South Asia in late December 2004.
Our response was immediate and focused. Within hours of
the disaster, the firm was working to ensure that our people in
the area were safe. Within days, we had partnered with our
contacts in the non-profit community— including CARE,
Japan Red Cross Society, the International Rescue Committee
and AmeriCares — to identify the most urgent needs in the
regions and to provide assistance to those impacted by the
disaster. Beyond our immediate response, Goldman Sachs
remains committed to assisting over the long term through
supporting initiatives to rebuild the physical and economic
infrastructures of the impacted countries. We believe that our
business success is accompanied by a responsibility to act,
and the response of our people to this tragedy underscores the
strength of this belief throughout the firm.
Investment฀Banking฀
Investment banking activity began to recover during 2004.
Global completed mergers and acquisitions increased 33%
compared with 2003 and worldwide common stock issuance
nearly doubled. Our net revenues in Investment Banking
increased 24% to $3.37 billion and pre-tax earnings almost
doubled to $401 million.
In 2004, we maintained leadership positions in our most
important high-margin businesses. In mergers and acquisitions,
we ranked number one globally in announced and completed
activity for the seventh consecutive year and advised on seven
of the ten largest completed transactions. We also demonstrated
the strength of our equity underwriting franchise, ranking
second in worldwide common stock and initial public
offerings with leadership positions in every major region.
In leveraged finance, we continued to strengthen our global
business and we have been at the forefront of the growth of
the hybrid loan market, particularly working with financial
sponsor clients.
In a period in which trading results are more significant
than ever to the industry’s performance, some may under-
estimate the importance of Investment Banking. We believe it
is difficult to overstate the importance of Investment Banking
to our firm. Our traditional role as an advisor and underwriter
will always be a critical part of our business. In addition, in
today’s rapidly changing markets, corporate clients are
increasingly asking us to help them manage their risk by
acting as a principal. These opportunities are an attractive
source of transactions and come from the strength of our
relationships and the depth of our market knowledge.
fellow฀shareholders:
2004 was an outstanding year for Goldman Sachs —
the strongest performance in the firm’s history. Net revenues
increased 28% to a record $20.55 billion and net earnings
rose 52% to a record $4.55 billion. Earnings per diluted
share (EPS) were $8.92, the highest we have ever reported,
and our return on average tangible shareholders’ equity
was 25%, compared with 20% in 2003.
GOLDMAN฀SAC H S ฀ 2 0 0 4 ฀ANNUAL฀ R E P O RT฀฀฀3
GOLDMAN฀SAC H S ฀ 2 0 0 4 ฀ANNUAL฀ R E P O RT฀฀฀3