Goldman Sachs Group, Inc. (GS)
Q2 2011 Earnings Call Transcript
July 19, 2011 10:30 a.m. ET

Executives

Dane E. Holmes – Director, Investor Relations
David A. Viniar – Executive Vice President and Chief Financial Officer

Analysts

Glenn Schorr – Nomura Securities International, Inc.
Howard Chen – Credit Suisse
Guy Moszkowski – Bank of America/Merrill Lynch
Roger Freeman – Barclays Capital
Michael Carrier – Deutsche Bank
Kian Abouhossein – JPMorgan
Meredith Whitney – Meredith Whitney Advisory, LLC
Chris Kotowski – Oppenheimer
Michael Mayo – CLSA
Edward Najarian – ISI Group
Fiona Swaffield – RBC Capital Markets
Matthew Burnell – Wells Fargo Securities

Presentation

Dane E. Holmes

Good morning. This is Dane Holmes, Director of Investor Relations at Goldman Sachs. Welcome to our second quarter earnings conference call. Today’s call may include forward-looking statements. These statements represent the firm’s belief regarding future events that by their nature are uncertain and outside of the firm’s control. The firm’s actual results and financial condition may differ possibly materially from what is indicated in those forward-looking statements. For a discussion of some of the risks and factors that could affect the firm’s future results, please see the description of risk factors in our current annual report on Form 10-K for our fiscal year ended December 2010.

I would also direct you to read the forward-looking disclaimers in our quarterly earnings release particularly as it relates to our investment banking transaction backlog, capital ratios, risk-weighted assets and global core excess. And you should also read the information on the calculation of non-GAAP financial measures that is posted on the investor relations portion of our website, www.gs.com. This audio cast is copyrighted material of The Goldman Sachs Group Inc. and may not be duplicated, reproduced or rebroadcast without our consent.

Our Chief Financial Officer, David Viniar, will now review the firm’s results. David?

David A. Viniar

Thanks, Dan. I would like to thank all of you for listening today. I will give an overview of our second quarter results and then take your questions.

Net revenues in the second quarter were $7.3 billion and net earnings were $1.1 billion. Earnings per diluted share were $1.85 and our annualized return on common equity was 6.1%.

Year-to-date excluding the impact of a $1.6 billion preferred dividend associated with our repayment of the Berkshire Hathaway preferred stock in the first quarter, our annualized return on common equity was 10.2%. Including the impact, our annualized return on common equity was 8%.

The second quarter was dominated by concerns surrounding the state of the global economy. These concerns emanated from a variety of regions around the world including Europe, the United States and China. While many of these concerns have been around for quite some time, further deterioration and economic data coupled with the passage of time without resolution of a significant number of political issues has led to heightened concerns among market participants.

Sovereign risk in a number of smaller European member states increased with a particular focus on developments in Greece. Concerns remain for other countries within Europe and the potential negative economic impact on financial institutions with credit exposure to these sovereigns.

Within the U.S., concerns have centered on the political debate on raising the debt ceiling, the growing budget deficit, stubbornly high unemployment and potential further pressure on U.S. housing prices. Finally, there has also been greater focus on China, given the important role it plays in the broader global economy.

The complexity surrounding the interplay of these various economic considerations has created tremendous uncertainty about the state of the world’s economy and among other things has resulted in limited conviction among market participants. As a result of this uncertainty, many of our investing clients have significantly reduced their risk appetite and thus activity levels generally declined.

Despite these market uncertainties, we remain focused on serving the needs of our leading global client base. Within investment banking, we continue to focus on providing our clients with world-class strategic advice and superior financing execution, which is reflected in our investment banking league table standards.

Year-to-date, we ranked first in announced M&A globally. We are also ranked first in equity and equity-related common stock offerings and IPOs globally year-to-date. We understand that our clients value consistent high-quality service and excellent execution, effectively meeting their needs for advice, financing, risk capital and liquidity as well as asset management solutions essential to our long-term performance.