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GS 2008 Entire Annual Report

GS 2008 Entire Annual Report

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Published by: lelaissezfaire on Mar 20, 2010
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annual report
As of or for the Year Ended November($ and share amounts in millions, except per share amounts)
2007 2006
Operating Results
Net revenuesInvestment banking
$ 5,185
$ 7,555 $ 5,629Trading and principal investments
31,226 25,562Asset management and securities services
7,206 6,474Total net revenues
45,987 37,665Pre-tax earnings
17,604 14,560Net earnings
11,599 9,537Net earnings applicable to common shareholders
11,407 9,398
Common Share Data
Diluted earnings per common share
$ 4.47
$ 24.73 $ 19.69Average diluted common shares outstanding
461.2 477.4Dividends declared and paid per common share
$ 1.40
$ 1.40 $ 1.30Book value per common share
90.43 72.62Tangible book value per common share
(2) (3)
78.88 61.47Ending stock price
226.64 201.60
Financial Condition and Other Operating Data
Total assets
$1,119,796 $838,201Other secured fnancings (long-term)
33,300 26,134Unsecured long-term borrowings
164,174 122,842Total shareholders’ equity
42,800 35,786Leverage ratio
26.2x 23.4xAdjusted leverage ratio
17.5x 16.1xDebt to equity ratio
3.8x 3.4xReturn on average common shareholders’ equity
32.7% 32.8%Return on average tangible common shareholders’ equity
38.2% 39.8%
Selected Data
Total employees
30,522 26,467Assets under management
(in billions)
$ 779
$ 868 $ 676
Book value per common share is based on common shares outstanding, including restricted stock units granted to employees with no future service requirements, of 485.4 million,
439.0 million and 450.1 million as o November 2008, November 2007 and November 2006, respectively.
Tangible book value per common share is computed by dividing tangible common shareholders’ equity by the number of common shares outstanding, including restricted stock units
granted to employees with no uture service requirements.
Tangible common shareholders’ equity equals total shareholders’ equity less preferred stock, goodwill and identifiable intangible assets, excluding power contracts.
See “Financial Information — Management’s Discussion and Analysis — Equity Capital — Capital Ratios and Metrics” for further information regarding our calculation of tangible common
shareholders’ equity.
The leverage ratio equals total assets divided by total shareholders’ equity.
The adjusted leverage ratio equals adjusted assets divided by tangible equity capital. See “Financial Information — Management’s Discussion and Analysis — Equity Capital — Capital
Ratios and Metrics” or urther inormation regarding adjusted assets, tangible equity capital and our calculation o the adjusted leverage ratio.
The debt to equity ratio equals unsecured long-term borrowings divided by total shareholders’ equity.
Return on average common shareholders’ equity is computed by dividing net earnings applicable to common shareholders by average monthly common shareholders’ equity.
Return on average tangible common shareholders’ equity is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders’equity. See “Financial Inormation — Management’s Discussion and Analysis — Results o Operations — Financial Overview” or urther inormation regarding our calculation o return onaverage tangible common shareholders’ equity.
Global equity markets were down anywhere from 30% to60% in 2008. Credit markets became virtually frozen. Severalmajor financial institutions were either stabilized by theirgovernments, the private sector or filed for bankruptcy.Hundreds of thousands of people lost their jobs, over $1 trillionin credit-related losses were recorded, and nearly $30 trillionin market value was wiped out in a matter of months.All of us, in one way or another, have been humbled by theseevents. It is a truism that markets are cyclical, that years of optimism and prosperity can be quickly undone by pessimismand uncertainty. But this time, the drivers and the consequencesare broader in scope and much more intense in effect.As we have said in our previous letters, we have always seenit as our responsibility as leaders of Goldman Sachs to ensurethat the firm is prepared to deal with adverse conditions
so that we are able to mitigate the downside and, if possible,position the firm to take advantage of the opportunitiespresented by improving markets. While recent markets havetested our firm like few other times in our 140-year history,we are pleased to report that we not only remained profitablein 2008, but also our culture, client franchise and strategyhave proven extremely resilient.In a very challenging environment, net revenues fell 52% to$22.2 billion and net earnings decreased 80% to $2.3 billion.Diluted earnings per common share were $4.47 and our returnon average common shareholders’ equity was 4.9%. We grewbook value per share during 2008 and, since our IPO, it hasgrown at a compound annual growth rate of 19%.In this year’s letter, we would like to address some of theimplications of recent events for Goldman Sachs and for ourindustry. We will also discuss how our integrated businessmodel, diverse revenue mix and intense focus on riskmanagement position us favorably going forward. Finally,we will talk about how the resiliency of our culture andfocus on our clients will continue to be the strongest catalystsfor our long-term success.
A History of Adaptation
As we confront today’s challenges, we have not lost sightof the fact that many of the most important opportunities
and successes
in Goldman Sachs’ history came about duringtimes of stress.During the Asian crisis at the end of the last decade, we madeseveral significant investments in consumer and real estateassets. After the dislocation that followed Long Term CapitalManagement’s problems in 1998, we increased our fixedincome market share. Following the telecom and technologybubble, we built up our private equity and mezzanineinvestments. After the failure of Enron when capital wasscarce in the power sector, we invested in power plants,resulting in recurring trading revenues as well as gainsfrom restructuring power contracts. In each instance,Goldman Sachs was able to identify opportunities duringtimes of market dislocation.In this same vein, we have proven our ability to adapt ourown structure, time and again, to meet rapidly shiftingmarket conditions. In the last two decades, we have takendramatic steps to transform ourselves to best serve theneeds of our clients in the face of formidable circumstances.When a stable capital base and increased funding diversificationbecame necessary, we converted from a private partnershipto a publicly traded company. When scale became critical,we transformed ourselves from a relatively small firm to aFortune 100 company. When our clients demanded a moreintegrated approach, we realigned and grew the firm to becomea comprehensive source of advice, financing and co-investment,providing clients the wherewithal to realize their goals.And, as markets opened up and growth accelerated aroundthe world, we expanded from being mainly a U.S.-based firmto a truly global organization.In every instance, questions about our strategy were raised,but our franchise and culture emerged stronger, primarilybecause we never lost sight of the importance of developingand maintaining strong client relationships and respondingto structural market developments.
Bank Holding Company
Continuing this track record of responsiveness, in 2008,we became a bank holding company (BHC). This was doneto allow Goldman Sachs to address market perceptionsthat placed a premium on the value of oversight by theFederal Reserve Board and to be able to access a broaderset of funding alternatives.In our decision, we saw nothing about becoming a BHCthat would fundamentally detract from our core mission of 
fellow shareholders:
When we wrote to you last, a relatively healthy market environment in the first half of 2007 had givenway to a much more challenging one, marked by significant volatility for the remainder of the year.Since that time, global financial markets have been buffeted by a series of extraordinary and tumultuousevents. Most acutely this past fall, a global contagion of fear and panic choked off the arteries of finance, compounding a broader deterioration of the global economy.
goldman sachs 2008 annual report /  

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