Full Year and Fourth Quarter 2019 Earnings Results Presentation
January 15, 2020
Results Snapshot
Net Revenues | Net Earnings | EPS | |||
2019 | $36.55 billion | 2019 | $8.47 billion | 2019 | $21.03 |
4Q | $9.96 billion | 4Q | $1.92 billion | 4Q | $4.69 |
ROE1 | ROTE1 | Impact of Litigation | |||
2019 | 10.0% | 2019 | 10.6% | 2019 EPS | -$3.16 |
4Q | 8.7% | 4Q | 9.2% | 2019 ROE / ROTE | -1.5pp /-1.6pp |
Annual Highlights
#1 in Announced and Completed M&A2 | Record FICC financing net revenues |
#1 in Equity and equity-related offerings2 | Record AUS3,4 |
2nd highest Investment Banking net revenues | Record Consumer & Wealth Management net revenues |
1
Macro Perspectives
Constructive Fundamentals
Accelerating global growth
GDP Growth: | U.S. | Global |
2020 │ 2021 | +2.2% │ +2.4% | +3.4% │ +3.6% |
Supportive sentiment and fundamentals | ||
Strong Consumer | Low Global | Low U.S. |
Sentiment | Inflation | Unemployment |
Operating Backdrop in 4Q19
Macro Factors
U.S. - China Trade
Brexit
Low Global Rates
Steeper | Accommodative | Higher | Muted Corporate |
Yield Curve | Central Banks | Equity Markets | Sentiment |
U.S. 2-10 Year Spread | 25bps Fed rate cut in | S&P 500: +9% | CEO Economic |
~30bps wider | October | Stoxx Europe 600: +6% | Outlook Index: |
-3% QoQ | |||
2020 and 2021 estimated real gross domestic product (GDP) growth per Goldman Sachs Research | 2 |
Financial Overview
Financial Results
$ in millions, | vs. | vs. | vs. | ||||||
except per share amounts | 4Q19 | 3Q19 | 4Q18 | 2019 | 2018 | ||||
Investment Banking | $ | 2,064 | 12% | -6% | $ | 7,599 | -7% | ||
Global Markets | 3,480 | -2% | 33% | 14,779 | 2% | ||||
Asset Management | 3,003 | 85% | 52% | 8,965 | 1% | ||||
Consumer & Wealth Management | 1,408 | 7% | 8% | 5,203 | 1% | ||||
Net revenues | $ | 9,955 | 20% | 23% | $ | 36,546 | -% | ||
Provision for credit losses | 336 | 15% | 51% | 1,065 | 58% | ||||
Operating expenses | 7,298 | 30% | 42% | 24,898 | 6% | ||||
Pre-tax earnings | 2,321 | -4% | -14% | 10,583 | -15% | ||||
Net earnings | 1,917 | 2% | -24% | 8,466 | -19% | ||||
Net earnings to common | $ | 1,724 | -4% | -26% | $ | 7,897 | -20% | ||
Diluted EPS | $ | 4.69 | -2% | -22% | $ | 21.03 | -17% | ||
ROE1 | 8.7% | -0.3pp | -3.4pp | 10.0% | -3.3pp | ||||
ROTE1 | 9.2% | -0.3pp | -3.6pp | 10.6% | -3.5pp | ||||
Full Year Net Revenue Mix by Segment
Consumer & Wealth
Management
14%Investment
Banking
21%
Asset Management 25%
(FICC 20%)
(Equities 20%)
Global | |||
FY19 Litigation Impact | Markets | ||
Diluted EPS | $ | -3.16 | 40% |
ROE | -1.5pp | ||
ROTE | -1.6pp | ||
3
Investment Banking
Financial Results | ||||||||||
vs. | vs. | vs. | ||||||||
$ in millions | 4Q19 | 3Q19 | 4Q18 | 2019 | 2018 | |||||
Financial advisory | $ | 855 | 23% | -29% | $ | 3,197 | -7% | |||
Equity underwriting | 378 | 3% | 23% | 1,482 | -9% | |||||
Debt underwriting | 599 | 14% | 37% | 2,119 | -10% | |||||
Underwriting | 977 | 10% | 31% | 3,601 | -10% | |||||
Corporate lending | 232 | -9% | -8% | 801 | 7% | |||||
Net revenues | 2,064 | 12% | -6% | 7,599 | -7% | |||||
Provision for credit losses | 75 | -18% | 108% | 333 | 169% | |||||
Full Year Worldwide League Table Rankings2
#1 | Announced M&A | #1 | Equity & equity-related |
#1 | Completed M&A | #1 | Common stock offerings |
#2 | High-yield debt |
Investment Banking Highlights
- 4Q19 net revenues lower YoY
- Financial advisory 4Q19 net revenues significantly lower YoY, compared with a strong prior year period, reflecting a significant decrease in industry-wide completed M&A volumes
- Underwriting 4Q19 net revenues significantly higher YoY, driven by asset-backed activity and an increase in industry-wide equity underwriting transactions
- 2019 net revenues lower YoY compared with a strong 2018, reflecting lower net revenues in Underwriting and Financial advisory
- Overall backlog3 increased QoQ, reflecting increases in advisory and equity underwriting backlog, and essentially unchanged YoY
Investment Banking Net Revenues ($ in millions)
$2,193 | $2,064 | ||||
$251 | $1,948 | ||||
$1,746 | $1,841 | $232 | |||
$187 | |||||
$437 | $254 | ||||
$128 | $514 | $599 | |||
$307 | $482 | $524 | |||
$262 | $476 | $366 | $378 | ||
$1,198 | $874 | $855 | |||
$771 | $697 | ||||
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | |
Financial advisory | Equity underwriting | Debt underwriting | Corporate lending |
4
Global Markets - FICC
Financial Results
vs. | vs. | vs. | |||||||
$ in millions | 4Q19 | 3Q19 | 4Q18 | 2019 | 2018 | ||||
FICC intermediation | $ | 1,382 | 5% | 83% | $ | 6,009 | 5% | ||
FICC financing | 387 | 6% | 17% | 1,379 | 10% | ||||
FICC | 1,769 | 5% | 63% | 7,388 | 6% | ||||
Equities intermediation | 979 | -9% | 9% | 4,374 | -7% | ||||
Equities financing | 732 | -7% | 17% | 3,017 | 9% | ||||
Equities | 1,711 | -8% | 12% | 7,391 | -1% | ||||
Net revenues | 3,480 | -2% | 33% | 14,779 | 2% | ||||
Provision for credit losses | 20 | 25% | 186% | 35 | -33% | ||||
FICC Highlights
- 4Q19 net revenues significantly higher YoY compared with a weak 4Q18
- FICC intermediation net revenues were significantly higher, reflecting higher net revenues across most major businesses
- 2019 net revenues higher YoY, due to higher net revenues in FICC intermediation and FICC financing
- 4Q19 operating environment generally characterized by improved market conditions compared with 3Q19, while client activity levels were lower
FICC Net Revenues ($ in millions)
$2,238
$366 | $1,769 | ||||
$1,702 | $1,679 | ||||
$262 | $364 | $387 | |||
$1,087 | |||||
$330 | $1,872 | ||||
$1,440 | $1,315 | $1,382 | |||
$757 | |||||
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | |
Intermediation | Financing | 5 | |||
Global Markets - Equities
Financial Results
vs. | vs. | vs. | |||||||
$ in millions | 4Q19 | 3Q19 | 4Q18 | 2019 | 2018 | ||||
FICC intermediation | $ | 1,382 | 5% | 83% | $ | 6,009 | 5% | ||
FICC financing | 387 | 6% | 17% | 1,379 | 10% | ||||
FICC | 1,769 | 5% | 63% | 7,388 | 6% | ||||
Equities intermediation | 979 | -9% | 9% | 4,374 | -7% | ||||
Equities financing | 732 | -7% | 17% | 3,017 | 9% | ||||
Equities | 1,711 | -8% | 12% | 7,391 | -1% | ||||
Net revenues | 3,480 | -2% | 33% | 14,779 | 2% | ||||
Provision for credit losses | 20 | 25% | 186% | 35 | -33% | ||||
Equities Highlights
- 4Q19 net revenues higher YoY
- Equities financing net revenues were higher, reflecting improved spreads and higher average customer balances
- Equities intermediation net revenues were higher, driven by cash products
- 2019 net revenues essentially unchanged YoY, as lower net revenues in Equities intermediation were offset by higher net revenues in Equities financing
- 4Q19 operating environment was characterized by generally higher global equity prices and lower levels of volatility compared with 3Q19
Equities Net Revenues ($ in millions)
$2,014
$1,802 | $1,864 |
$1,711 | |
$1,522 | $860 |
$641 | |
$784 | |
$625 | $732 |
$1,161 | $1,154 | $1,080 | $979 |
$897 | |||
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | |
Intermediation | Financing | 6 |
Asset Management
Financial Results
vs. | vs. | vs. | |||||||
$ in millions | 4Q19 | 3Q19 | 4Q18 | 2019 | 2018 | ||||
Management and other fees | $ | 666 | 1% | 6% | $ | 2,600 | -% | ||
Incentive fees | 45 | 88% | -33% | 130 | -66% | ||||
Equity investments | 1,865 | N.M. | 96% | 4,765 | 13% | ||||
Lending | 427 | 25% | 31% | 1,470 | -10% | ||||
Net revenues | 3,003 | 85% | 52% | 8,965 | 1% | ||||
Provision for credit losses | 120 | 48% | 155% | 274 | 71% | ||||
Equity Investments Asset Mix4
Asset Management Highlights
- 4Q19 net revenues significantly higher YoY
- Equity investments net revenues were significantly higher, reflecting net gains in public and private equities
- Lending net revenues were significantly higher, primarily reflecting higher net gains from investments in debt instruments
- Management and other fees were higher, reflecting higher average AUS
- 2019 net revenues essentially unchanged YoY, reflecting higher net revenues in Equity investments, offset by significantly lower Incentive fees and lower net revenues in Lending
Asset Management Net Revenues ($ in millions)
$3,003 | |
$2,548 | $427 |
$351 | |
$1,974 | |
$1,793 |
$ in billions | 4Q19 | |
Corporate | $ | 17 |
Real estate | 5 | |
Total | $ | 22 |
$ in billions | 4Q19 | |
Public equity | $ | 2 |
Private equity | 20 | |
Total | $ | 22 |
$327 | $351 | $1,621 | $1,865 | ||
$1,499 | $341 | ||||
$951 | $805 | $596 | |||
$67 | $30 | $31 | $24 | $45 | |
$629 | $607 | $667 | $660 | $666 |
- In addition, the firm's consolidated investment entities5 have a carrying value of $17 billion, funded with liabilities of approximately $9 billion, substantially all of which were nonrecourse
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 | |
Management and other fees | Incentive fees | Equity investments | Lending | 7 |
Consumer & Wealth Management
Financial Results
vs. | vs. | vs. | ||||||
$ in millions | 4Q19 | 3Q19 | 4Q18 | 2019 | 2018 | |||
Management and other fees | $ | 967 | 10% | 17% | $ | 3,475 | 6% | |
Incentive fees | 19 | -10% | -78% | 81 | -82% | |||
Private banking and lending | 194 | -3% | -4% | 783 | -5% | |||
Wealth management | 1,180 | 7% | 6% | 4,339 | -5% | |||
Consumer banking | 228 | 5% | 23% | 864 | 41% | |||
Net revenues | 1,408 | 7% | 8% | 5,203 | 1% | |||
Provision for credit losses | 121 | 17% | -8% | 423 | 25% | |||
Consumer & Wealth Management Highlights
- 4Q19 net revenues higher YoY
- Wealth management net revenues higher YoY, due to higher Management and other fees, reflecting higher average AUS, partially offset by lower Incentive fees
- Consumer banking net revenues higher YoY, driven by higher net interest income, primarily reflecting an increase in deposit balances
- 2019 net revenues essentially unchanged YoY, as significantly higher net revenues in Consumer banking and record Management and other fees were offset by significantly lower Incentive fees
- Continued to scale our online deposit platform, as consumer deposits increased $24 billion in 2019 to $60 billion4
Consumer & Wealth Management Net Revenues ($ in millions)
$1,304 | $1,249 | $1,318 | $1,408 | ||
$1,228 | $228 | ||||
$186 | $217 | ||||
$203 | $216 | ||||
$194 | |||||
$202 | $199 | ||||
$203 | $187 | $19 | |||
$86 | $13 | $21 | |||
$28 | |||||
$830 | $794 | $833 | $881 | $967 | |
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 |
Management and other fees Incentive fees Private banking and lending Consumer banking
8
Firmwide Assets Under Supervision
Firmwide Assets Under Supervision3,4
By Segment | vs. | vs. | ||||||
$ in billions | 4Q19 | 3Q19 | 4Q18 | 3Q19 | 4Q18 | |||
Asset Management | $ | 1,298 | $ | 1,232 | $ | 1,087 | 5% | 19% |
Consumer & Wealth Management | 561 | 530 | 455 | 6% | 23% | |||
Firmwide AUS | $ | 1,859 | $ | 1,762 | $ | 1,542 | 6% | 21% |
By Asset Class | vs. | vs. | ||||||||
$ in billions | 4Q19 | 3Q19 | 4Q18 | 3Q19 | 4Q18 | |||||
Alternative investments | $ | 185 | $ | 182 | $ | 167 | 2% | 11% | ||
Equity | 423 | 392 | 301 | 8% | 41% | |||||
Fixed income | 789 | 784 | 677 | 1% | 17% | |||||
Long-term AUS | 1,397 | 1,358 | 1,145 | 3% | 22% | |||||
Liquidity products | 462 | 404 | 397 | 14% | 16% | |||||
Firmwide AUS | $ | 1,859 | $ | 1,762 | $ | 1,542 | 6% | 21% | ||
Long-Term AUS Net Flows3,4,6 ($ in billions)
$69
$20 | $17 | |||
$3 | $2 | |||
4Q18 | 1Q19 | 2Q19 | 3Q19 | 4Q19 |
Assets Under Supervision Highlights3,4
- Firmwide AUS increased $317 billion6 in 2019 to a record $1.86 trillion, including Asset Management AUS increasing $211 billion6 and Consumer & Wealth Management increasing $106 billion6
- Long-termnet inflows of $108 billion, primarily in fixed income and equity assets
- Liquidity products net inflows of $65 billion
- Net market appreciation of $144 billion, primarily in equity and fixed income assets
- Over past five years, total cumulative organic long-term AUS net inflows of ~$195 billion
4Q19 AUS Mix3,4
Asset | Distribution | Region | Vehicle | ||||
Class | Channel | ||||||
10% | Alternative | 9% | Asia | 10% | Private | ||
investments | funds | ||||||
30% | Wealth | 15% | and other | ||||
23% | Equity | management | EMEA | ||||
32% | Public | ||||||
funds | |||||||
25% | Liquidity | Third-party | |||||
products | 33% | ||||||
distributed | |||||||
76% | Americas | ||||||
58% | Separate | ||||||
Fixed | accounts | ||||||
42% | income | 37% | Institutional | ||||
9
Net Interest Income and Loans
Net Interest Income by Segment ($ in millions)
$3,767 | $4,362 | |||||||||||||||||||
$1,661 | ||||||||||||||||||||
$1,356 | $1,065 | |||||||||||||||||||
$991 | $1,008 | |||||||||||||||||||
$511 | ||||||||||||||||||||
$482 | $375 | $425 | $444 | |||||||||||||||||
$1,607 | $1,670 | $136 | $124 | $165 | ||||||||||||||||
$388 | $316 | $314 | ||||||||||||||||||
$322 | $520 | $92 | $143 | $142 | ||||||||||||||||
2018 | 2019 | 4Q18 | 3Q19 | 4Q19 | ||||||||||||||||
Consumer & Wealth Management | Asset Management | |||||||||||||||||||
Global Markets | Investment Banking | |||||||||||||||||||
Net Interest Income Highlights
- 2019 net interest income increased $595 million YoY, reflecting growth in loans
- 4Q19 net interest income increased $74 million YoY, reflecting growth in loans
Loans4
$ in billions | 4Q19 | 3Q19 | 4Q18 | |||||
Corporate | $ | 46 | $ | 46 | $ | 42 | ||
Commercial real estate | 17 | 16 | 14 | |||||
Residential real estate | 7 | 7 | 8 | |||||
Real estate | 24 | 23 | 22 | |||||
Wealth management | 28 | 26 | 25 | |||||
Consumer | 5 | 5 | 5 | |||||
Credit cards | 2 | 1 | - | |||||
Other | 5 | 5 | 5 | |||||
Allowance for loan and lease losses | (1) | (1) | (1) | |||||
Total Loans | $ | 109 | $ | 105 | $ | 98 | ||
Loan Highlights
- Total loans increased $11 billion, up 11%, during 2019
- Provision for credit losses was $1.07 billion for 2019, 58% higher YoY, primarily reflecting higher impairments (primarily related to corporate loans) and higher provisions related to consumer loans (reflecting growth in credit card loans). The 2019 firmwide net charge-off rate was 0.6%
- Provision for credit losses was $336 million for 4Q19, 51% higher YoY, primarily reflecting higher impairments (primarily related to corporate loans). The 4Q19 annualized firmwide net charge-off rate was 0.7%
10
Expenses
Financial Results
vs. | vs. | vs. | |||||
$ in millions | 4Q19 | 3Q19 | 4Q18 | 2019 | 2018 | ||
Compensation and benefits | $ | 3,046 | 12% | 64% | $ | 12,353 | -% |
Brokerage, clearing, exchange and | |||||||
814 | -5% | -2% | 3,252 | 2% | |||
distribution fees | |||||||
Market development | 200 | 18% | -4% | 739 | -% | ||
Communications and technology | 308 | 9% | 18% | 1,167 | 14% | ||
Depreciation and amortization | 464 | -2% | 23% | 1,704 | 28% | ||
Occupancy | 318 | 26% | 48% | 1,029 | 27% | ||
Professional fees | 366 | 5% | 15% | 1,316 | 8% |
Expense Highlights
- 2019 total operating expenses increased YoY, reflecting:
- Higher non-compensation expenses, which included:
- Significantly higher net provisions for litigation and regulatory proceedings ($1.24 billion in 2019 vs. $844 million in 2018)
- Higher expenses for consolidated investments and technology (primarily reflected in depreciation and amortization, communications and technology, occupancy, and other expenses)
- Higher expenses related to the firm's credit card and transaction banking activities (primarily reflected in professional fees and other expenses) and expenses related to United Capital
- Compensation and benefits expenses were essentially unchanged
- 2019 effective income tax rate of 20.0%, up from 16.2% for 2018, as 2018 included a $487 million income tax benefit related to the finalization of the enactment impact of the Tax Cuts and Jobs Act
- 2020 effective tax rate expected to be ~21%
Efficiency Ratio3
Other expenses | 1,782 | N.M. | 64% | 3,338 | 18% | ||
Total operating expenses | $ | 7,298 | 30% | 42% | $ | 24,898 | 6% |
Provision for taxes | $ | 404 | -25% | 138% | $ | 2,117 | 5% |
Effective Tax Rate | 20.0% | 3.8pp | |||||
64%
68%
2018 | 2019 | ||
Impact of Litigation: | +2.3pp | +3.4pp | 11 |
Capital and Balance Sheet
Capital3,4
$ in billions | 4Q19 | 3Q19 | 4Q18 | |||
Common equity tier 1 (CET1) capital | $ | 74.9 | $ | 75.7 | $ | 73.1 |
Standardized RWAs | $ | 564 | $ | 557 | $ | 548 |
Standardized CET1 capital ratio | 13.3% | 13.6% | 13.3% | |||
Advanced RWAs | $ | 545 | $ | 566 | $ | 558 |
Advanced CET1 capital ratio | 13.7% | 13.4%7 | 13.1% | |||
Supplementary leverage ratio | 6.2% | 6.2% | 6.2% |
Selected Balance Sheet Data4
$ in billions | 4Q19 | 3Q19 | 4Q18 | |||
Total assets | $ | 993 | $ | 1,007 | $ | 932 |
Deposits | 190 | 183 | 158 | |||
Unsecured long-term borrowings | 207 | 217 | 224 | |||
Shareholders' equity | 90 | 92 | 90 | |||
Average GCLA | 237 | 238 | 229 | |||
Capital and Balance Sheet Highlights
- Advanced CET1 ratio increased YoY, while Standardized CET1 ratio was unchanged
- Decrease in Advanced RWAs reflected lower credit RWAs driven by updates to the firm's calculation of loss given default7
- Increase in Standardized RWAs reflected higher credit RWAs
- Returned $6.88 billion of capital to common shareholders during the year
- Paid $1.54 billion in common stock dividends
- Repurchased 25.8 million shares of common stock, for a total cost of $5.34 billion3
- Maintained highly liquid balance sheet and robust liquidity metrics
- Deposits increased $32 billion, reflecting strong growth in Consumer deposits
- Continue to expect vanilla debt maturities to outpace issuance in 2020 although to a lesser extent than in 2019
Book Value
In millions, except per share amounts | 4Q19 | 3Q19 | 4Q18 | |||
Basic shares3 | 361.8 | 369.3 | 380.9 | |||
Book value per common share | $ | 218.52 | $ | 218.82 | $ | 207.36 |
Tangible book value per common share1 | $ | 205.15 | $ | 205.59 | $ | 196.64 |
12 |
Cautionary Note on Forward-Looking Statements
This presentation contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead represent only the firm's beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the firm's control. It is possible that the firm's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these statements. For information about some of the risks and important factors that could affect the firm's future results and financial condition and the forward-looking statements below, see "Risk Factors" in Part I, Item 1A of the firm's Annual Report on Form 10- K for the year ended December 31, 2018.
Information regarding the firm's assets under supervision, capital ratios, risk-weighted assets, supplementary leverage ratio, balance sheet data, global core liquid assets (GCLA) and the impact of adopting ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments" consists of preliminary estimates. These estimates are forward-looking statements and are subject to change, possibly materially, as the firm completes its financial statements.
Statements regarding (i) the firm's planned 2020 vanilla debt issuance, (ii) the firm's 2020 effective income tax rate, (iii) estimated GDP growth, (iv) the timing and profitability of business initiatives, (v) the level of future compensation expense as a percentage of operating expenses, (vi) the firm's investment banking transaction backlog, and (vii) the projected growth of the firm's deposits and associated interest expense savings are forward-looking statements. Statements regarding the firm's planned 2020 vanilla debt issuance are subject to the risk that actual issuances may differ, possibly materially, due to changes in market conditions, business opportunities or the firm's funding needs. Statements about the firm's expected 2020 effective income tax rate are subject to the risk that the firm's 2020 effective income tax rate may differ from the anticipated rate indicated, possibly materially, due to, among other things, changes in the firm's earnings mix or profitability, the entities in which the firm generates profits and the assumptions made in forecasting the firm's expected tax rate and potential future guidance from the U.S. IRS. Statements regarding estimated GDP growth are subject to the risk that actual GDP growth may differ, possibly materially, due to, among other things, changes in general economic conditions. Statements about the timing and benefits of business initiatives are based on the firm's current expectations regarding our ability to implement these initiatives and may change, possibly materially, from what is currently expected. Statements about the level of compensation expense, including as a percentage of operating expenses, as the firm's platform business initiatives reach scale are subject to the risks that the compensation costs to operate the firm's businesses, including platform initiatives, may be greater than currently expected. Statements about the firm's investment banking transaction backlog are subject to the risk that transactions may be modified or not completed at all and associated net revenues may not be realized or may be materially less than those currently expected. Important factors that could have such a result include, for underwriting transactions, a decline or weakness in general economic conditions, an outbreak of hostilities, volatility in the securities markets or an adverse development with respect to the issuer of the securities and, for financial advisory transactions, a decline in the securities markets, an inability to obtain adequate financing, an adverse development with respect to a party to the transaction or a failure to obtain a required regulatory approval. Statements regarding the projected growth of the firm's deposits and associated interest expense savings are subject to the risk that the actual growth and savings may differ, possibly materially, due to, among other things, market conditions and competition from other similar products.
13
Footnotes
1. Return on average common shareholders' equity (ROE) is calculated by dividing net earnings (or annualized net earnings for annualized ROE) applicable to common shareholders by average monthly common shareholders' equity. Tangible common shareholders' equity is calculated as total shareholders' equity less preferred stock, goodwill and identifiable intangible assets. Return on average tangible common shareholders' equity (ROTE) is calculated by dividing net earnings (or annualized net earnings for annualized ROTE) applicable to common shareholders by average monthly tangible common shareholders' equity. Tangible book value per common share (TBVPS) is calculated by dividing tangible common shareholders' equity by basic shares. Management believes that tangible common shareholders' equity and TBVPS are meaningful because they are measures that the firm and investors use to assess capital adequacy and that ROTE is meaningful because it measures the performance of businesses consistently, whether they were acquired or developed internally. Tangible common shareholders' equity, ROTE and TBVPS are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other companies.
The table below presents average and ending equity, and a reconciliation of average and ending common shareholders' equity to average and ending tangible common shareholders' equity:
AVERAGE FOR THE | AS OF | |||||||||
THREE MONTHS ENDED | YEAR ENDED | |||||||||
Unaudited, $ in millions | DECEMBER 31, 2019 | DECEMBER 31, 2019 | DECEMBER 31, 2019 | SEPTEMBER 30, 2019 | DECEMBER 31, 2018 | |||||
Total shareholders' equity | $ | 90,808 | $ | 90,297 | $ | 90,265 | $ | 92,012 | $ | 90,185 |
Preferred stock | (11,203) | (11,203) | (11,203) | (11,203) | (11,203) | |||||
Common shareholders' equity | 79,605 | 79,094 | 79,062 | 80,809 | 78,982 | |||||
Goodwill and identifiable intangible assets | (4,862) | (4,464) | (4,837) | (4,886) | (4,082) | |||||
Tangible common shareholders' equity | $ | 74,743 | $ | 74,630 | $ | 74,225 | $ | 75,923 | $ | 74,900 |
- Dealogic - January 1, 2019 through December 31, 2019.
-
For information about the following items, see the referenced sections in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the firm's Quarterly Report on Form 10-Q for the period ended September 30, 2019: (i) investment banking transaction backlog - see "Results of Operations - Investment Banking" (ii) assets under supervision - see "Results of Operations - Investment Management" (iii) efficiency ratio - see "Results of Operations - Operating Expenses" (iv) basic shares - see "Balance Sheet and Funding Sources - Balance Sheet Analysis and Metrics" (v) share repurchase program - see "Equity Capital Management and Regulatory Capital - Equity Capital Management" and (vi) global core liquid assets - see "Risk Management - Liquidity Risk Management."
For information about risk-based capital ratios and supplementary leverage ratio, see Note 20 "Regulation and Capital Adequacy" in Part I, Item 1 "Financial Statements" in the firm's Quarterly Report on Form 10-Q for the period ended September 30, 2019. - Represents a preliminary estimate for the fourth quarter of 2019 and may be revised in the firm's Annual Report on Form 10-K for the year ended December 31, 2019.
- Includes consolidated investment entities reported in "Other assets" in the consolidated balance sheets, substantially all of which related to entities engaged in real estate investment activities. These assets are generally accounted for at historical cost less depreciation.
- Net inflows in assets under supervision for the year ended December 31, 2019 included $71 billion of total inflows (substantially all in equity and fixed income assets) in connection with the acquisitions of both Standard & Poor's Investment Advisory Services (SPIAS) and United Capital Financial Partners, Inc. (United Capital) in the third quarter of 2019 ($58 billion) and Rocaton Investment Advisors (Rocaton) in the second quarter of 2019 ($13 billion). SPIAS and Rocaton were included in the Asset Management segment and United Capital was included in the Consumer & Wealth Management segment.
- Beginning in the fourth quarter of 2019, the firm made changes to the calculation of loss given default for certain wholesale exposures. As of September 30, 2019, the estimated impact of these changes would have been an increase in the firm's Advanced common equity tier 1 capital ratio of approximately 1 percentage point.
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The Goldman Sachs Group Inc. published this content on 15 January 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 January 2020 12:27:01 UTC