Goldman Sachs 2009 Annual Report Download - page 4

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Fellow Shareholders:
When we reported to you last,
the world’s  nancial system and the global economy remained in the grips of
uncertainty. Our industry had been shaken to its foundation in the wake of severe
volatility, a sharp deterioration in equity values and extreme illiquidity across most
credit markets. Governments, regulators and market participants were forced to
confront simultaneously the unwinding of several  nancial institutions, ensuring
short-term market stability, shoring up investor con dence and enacting measures
to secure the long-term viability of the global capital markets.
By the end of 2009, owed in no small part to actions taken by
governments to fortify the system, conditions across  nancial
markets had improved signi cantly and to an extent few
predicted or thought possible. Equity prices largely rebounded,
credit spreads tightened and market activity was revitalized by
investors seeking new opportunities, all of which imply renewed
optimism, if not the beginnings of a potential recovery.
While improving  nancial conditions are often a precursor to
better economic ones, the economy nevertheless remains
fragile. Unemployment is high, consumer spending tepid and
access to credit for many smaller businesses continues to
be elusive. The effects of unwinding leverage embedded in the
system may linger for some time. As the global economy works
its way to recovery, the roles that we play for our clients become
even more important as companies and investors position
themselves to emerge stronger following the crisis.
The  rm’s focus on staying close to our clients and helping
them to navigate uncertainty and achieve their objectives is
largely responsible for what proved to be a year of resiliency
across our businesses and, by extension, a strong performance
for GoldmanSachs. In 2009, the  rm generated net revenues
of $45.17billion with net earnings of $13.39billion. Diluted
earnings per common share were $22.13 and our return on
average common shareholders’ equity was 22.5percent. Book
value per common share increased 23percent during 2009,
and has grown from $20.94 at the end of our  rst year as a
public company in 1999 to $117.48, a compounded annual
growth rate of 19percent over this period.
This past year, clients came to GoldmanSachs because of our
ability to integrate advice,  nancing, market making and investing
capabilities with sophisticated risk management. Importantly,
during the crisis, we were able to commit capital when market
liquidity and capital were scarce. Our duty to shareholders is to
protect and grow our client-focused franchise by remaining true
to our teamwork and performance-driven culture. Our shared
values have allowed us to be nimble and reactive, yet governed
by prudent, long-term thinking.
In this year’s letter, we will address some of the steps
GoldmanSachs took to further strengthen our capital, liquidity
and competitive position in 2009. We will discuss the  rm’s
client franchise and our contribution to well-functioning markets
in times of distress and, on an ongoing basis, by operating at
the center of global capital markets. We also will report to you on
how our integrated business model, diverse revenue streams
and risk management practices serve as the core of our strategy.
Importantly, we will focus on how our people and culture have
been and remain fundamental to the  rm’s success. Finally,
we will review the regulatory reform agenda as well as certain
developments that attracted considerable attention over the
course of the year.
EXTRAORDINARY MEASURES
Looking back on 2009, it is impossible to know what would have
happened to the  nancial system absent concerted government
action around the world. Institutions were hoarding cash and
were unwilling to transact with each other. This had extreme
consequences for even the healthiest of  nancial institutions and
companies. Through aggressive measures ranging from liquidity
and funding facilities to direct investment programs, the
government arrested the contagious fear that had engulfed the
global  nancial system and averted more acute circumstances.
We believe such efforts were absolutely critical to protecting the
 nancial system and ensuring the continued viability of the global
economy. GoldmanSachs is grateful for the indispensable
role governments played and we recognize that our  rm and our
shareholders bene ted from it.
In June 2009, the  rm repaid the U.S. government’s
investment of $10billion in GoldmanSachs as a participant
Goldman Sachs 2009 Annual Report