Goldman Sachs Reports Earnings Per Common Share of $14.13 for 2012

Fourth Quarter Earnings Per Common Share Were $5.60

NEW YORK--(BUSINESS WIRE)-- The Goldman Sachs Group, Inc. (NYS: GS) today reported net revenues of $34.16 billion and net earnings of $7.48 billion for the year ended December 31, 2012. Diluted earnings per common share were $14.13 compared with $4.51 for the year ended December 31, 2011. Return on average common shareholders' equity (ROE) ⁽¹⁾ was 10.7% for 2012.

Fourth quarter net revenues were $9.24 billion and net earnings were $2.89 billion. Diluted earnings per common share were $5.60 compared with $1.84 for the fourth quarter of 2011 and $2.85 for the third quarter of 2012. Annualized ROE ⁽¹⁾ was 16.5% for the fourth quarter of 2012.

Annual Highlights

• Goldman Sachs continued its leadership in investment banking, ranking first in worldwide announced and completed mergers and acquisitions for the year. ⁽²⁾
• The firm ranked first in worldwide equity and equity-related offerings and common stock offerings for the year. ⁽²⁾
• Debt underwriting produced net revenues of $1.96 billion, which is the second best annual performance and the highest since 2007.
• Fixed Income, Currency and Commodities Client Execution generated net revenues of $9.91 billion, including strong results in mortgages and solid results in credit products and interest rate products.
• Book value per common share increased approximately 11% to $144.67 and tangible book value per common share ⁽³⁾ increased approximately 12% to $134.06 compared with the end of 2011.
• The firm continues to manage its liquidity and capital conservatively. The firm's global core excess liquidity ⁽⁴⁾ was $175 billion ⁽⁵⁾ as of December 31, 2012. In addition, the firm's Tier 1 capital ratio under Basel 1 ⁽⁶⁾ was 16.7% ⁽⁵⁾ and the firm's Tier 1 common ratio under Basel 1 ⁽⁷⁾ was 14.5% ⁽⁵⁾ as of December 31, 2012.

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"While economic conditions remained challenging for much of last year, the strengths of our business model and client franchise, coupled with our focus on disciplined management, delivered solid performance for our shareholders," said Lloyd C. Blankfein, Chairman and Chief Executive Officer. "The firm's strategic position provides a solid basis on which to grow and generate superior returns."

Net Revenues

Investment Banking

Full Year
Net revenues in Investment Banking were $4.93 billion for 2012, 13% higher than 2011. Net revenues in Financial Advisory were $1.98 billion, essentially unchanged compared with 2011. Net revenues in the firm's Underwriting business were $2.95 billion, 25% higher than 2011, due to strong net revenues in debt underwriting. Net revenues in debt underwriting were significantly higher compared with 2011, primarily reflecting higher net revenues from investment-grade and leveraged finance activity. Net revenues in equity underwriting were lower compared with 2011, primarily reflecting a decline in industry-wide initial public offerings.

Fourth Quarter
Net revenues in Investment Banking were $1.41 billion for the fourth quarter of 2012, 64% higher than the fourth quarter of 2011 and 21% higher than the third quarter of 2012. Net revenues in Financial Advisory were $508 million, 8% higher than the fourth quarter of 2011, primarily reflecting an increase in industry-wide completed mergers and acquisitions. Net revenues in the firm's Underwriting business were $897 million, more than double the amount in the fourth quarter of 2011. Net revenues in both debt underwriting and equity underwriting were significantly higher compared with the fourth quarter of 2011, primarily reflecting an increase in industry-wide activity.

The firm's investment banking transaction backlog increased compared with both the end of the third quarter of 2012 and the end of 2011. ⁽⁸⁾

Institutional Client Services

Full Year
Net revenues in Institutional Client Services were $18.12 billion for 2012, 5% higher than 2011.

Net revenues in Fixed Income, Currency and Commodities Client Execution were $9.91 billion for 2012, 10% higher than 2011. These results reflected strong net revenues in mortgages, which were significantly higher compared with 2011. In addition, net revenues in credit products and interest rate products were solid and higher compared with 2011. These increases were partially offset by significantly lower net revenues in commodities and slightly lower net revenues in currencies. Although broad market concerns persisted during 2012, Fixed Income, Currency and Commodities Client Execution operated in a generally improved environment characterized by tighter credit spreads and less challenging market-making conditions compared with 2011.

Net revenues in Equities were $8.21 billion for 2012, essentially unchanged compared with 2011. Net revenues in securities services were significantly higher compared with 2011, reflecting a gain of approximately $500 million on the sale of the firm's hedge fund administration business. In addition, equities client execution net revenues were higher than 2011, primarily reflecting significantly higher results in cash products, principally due to increased levels of client activity. These increases were partially offset by lower commissions and fees, reflecting lower market volumes. During 2012, Equities operated in an environment generally characterized by an increase in global equity prices and lower volatility levels.

The net loss attributable to the impact of changes in the firm's own credit spreads on borrowings for which the fair value option was elected was $714 million ($433 million and $281 million related to Fixed Income, Currency and Commodities Client Execution and equities client execution, respectively) for 2012, compared with a net gain of $596 million ($399 million and $197 million related to Fixed Income, Currency and Commodities Client Execution and equities client execution, respectively) for 2011.

Fourth Quarter
Net revenues in Institutional Client Services were $4.34 billion for the fourth quarter of 2012, 42% higher than the fourth quarter of 2011 and 4% higher than the third quarter of 2012.

Net revenues in Fixed Income, Currency and Commodities Client Execution were $2.04 billion for the fourth quarter of 2012, 50% higher than the fourth quarter of 2011, reflecting significantly higher net revenues in credit products and mortgages compared with difficult market-making conditions during the fourth quarter of 2011, and higher net revenues in currencies. These increases were partially offset by significantly lower net revenues in commodities and lower net revenues in interest rate products. During the fourth quarter of 2012, Fixed Income, Currency and Commodities Client Execution operated in an environment characterized by generally tighter credit spreads and improved activity levels in credit products and mortgages compared with the fourth quarter of 2011.

Net revenues in Equities were $2.30 billion for the fourth quarter of 2012, 36% higher than the fourth quarter of 2011, reflecting significantly higher net revenues in securities services and equities client execution. The increase in securities services net revenues compared with the fourth quarter of 2011 reflected a gain of approximately $500 million on the sale of the firm's hedge fund administration business. The increase in equities client execution net revenues compared with the fourth quarter of 2011 reflected significantly higher net revenues in derivatives and higher net revenues in reinsurance. These increases were partially offset by lower commissions and fees, reflecting lower market volumes. During the quarter, Equities operated in an environment generally characterized by low volatility levels and an increase in equity prices in Asia and Europe.

The net loss attributable to the impact of changes in the firm's own credit spreads on borrowings for which the fair value option was elected was $126 million ($79 million and $47 million related to Fixed Income, Currency and Commodities Client Execution and equities client execution, respectively) for the fourth quarter of 2012. The net gain attributable to the impact of changes in the firm's own credit spreads on borrowings for which the fair value option was elected was $20 million (all related to equities client execution) for the fourth quarter of 2011.

Investing & Lending

Full Year
Net revenues in Investing & Lending were $5.89 billion for 2012. Investing & Lending net revenues were positively impacted by tighter credit spreads and an increase in global equity prices. Results for 2012 included a gain of $408 million from the firm's investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC), net gains of $2.39 billion from other investments in equities, primarily in private equities, net gains and net interest income of $1.85 billion from debt securities and loans, and other net revenues of $1.24 billion, principally related to the firm's consolidated investment entities.

Fourth Quarter
Net revenues in Investing & Lending were $1.97 billion for the fourth quarter of 2012. Investing & Lending net revenues were positively impacted by generally tighter credit spreads and an increase in equity prices in Asia and Europe. Results for the fourth quarter of 2012 included a gain of $334 million from the firm's investment in the ordinary shares of ICBC, net gains of $789 million from other investments in equities, primarily in private equities, net gains and net interest income of $485 million from debt securities and loans, and other net revenues of $365 million, principally related to the firm's consolidated investment entities.

Investment Management

Full Year
Net revenues in Investment Management were $5.22 billion for 2012, 4% higher than 2011, due to significantly higher incentive fees, partially offset by lower transaction revenues and slightly lower management and other fees. During the year, assets under supervision ⁽⁹⁾ increased $70 billion to $965 billion. Assets under management increased $26 billion to $854 billion, reflecting net market appreciation of $44 billion, primarily in fixed income and equity assets, partially offset by net outflows of $18 billion. Net outflows included outflows in equity, alternative investment and money market assets, partially offset by inflows in fixed income assets ⁽¹⁰⁾. Other client assets increased $44 billion to $111 billion, primarily due to net inflows ⁽¹⁰⁾.

Fourth Quarter
Net revenues in Investment Management were $1.52 billion for the fourth quarter of 2012, 20% higher than the fourth quarter of 2011 and 26% higher than the third quarter of 2012. The increase in net revenues compared with the fourth quarter of 2011 was primarily due to significantly higher incentive fees and higher management and other fees. During the quarter, assets under supervision increased $14 billion to $965 billion. Assets under management decreased $2 billion to $854 billion, reflecting net outflows of $7 billion ⁽¹⁰⁾, partially offset by net market appreciation of $5 billion. Net outflows included outflows in fixed income, equity and alternative investment assets, partially offset by inflows in money market assets. Other client assets increased $16 billion to $111 billion, primarily due to net inflows.

Expenses

Operating expenses were $22.96 billion for 2012, essentially unchanged compared with 2011.

Compensation and Benefits

Compensation and benefits expenses (including salaries, discretionary compensation, amortization of equity awards and other items such as benefits) were $12.94 billion for 2012, 6% higher than 2011. The ratio of compensation and benefits to net revenues for 2012 was 37.9% compared with 42.4% for 2011. Total staff ⁽¹¹⁾ decreased 3% compared with the end of 2011.

Non-Compensation Expenses

Full Year
Non-compensation expenses were $10.01 billion for 2012, 4% lower than 2011. The decrease compared with 2011 primarily reflected the impact of expense reduction initiatives, lower brokerage, clearing, exchange and distribution fees, lower occupancy expenses and lower impairment charges. These decreases were partially offset by higher other expenses and increased reserves related to the firm's reinsurance business. The increase in other expenses compared with 2011 primarily reflected higher net provisions for litigation and regulatory proceedings and higher charitable contributions.

Fourth Quarter
Non-compensation expenses were $2.95 billion for the fourth quarter of 2012, 14% higher than the fourth quarter of 2011 and 24% higher than the third quarter of 2012. The increase compared with the fourth quarter of 2011 was due to higher other expenses. The increase in other expenses primarily reflected higher net provisions for litigation and regulatory proceedings and higher charitable contributions.

The fourth quarter of 2012 included $260 million of net provisions for litigation and regulatory proceedings (including the settlement with the Federal Reserve Board regarding the independent foreclosure review) and $157 million of charitable contributions to Goldman Sachs Gives. The fourth quarter of 2011 included $47 million of net provisions for litigation and regulatory proceedings and $78 million of charitable contributions to Goldman Sachs Gives. Compensation was reduced in both 2012 and 2011 to fund the charitable contribution to Goldman Sachs Gives.

Provision for Taxes

The effective income tax rate for 2012 was 33.3%, essentially unchanged from 33.5% for the first nine months of 2012 and up from 28.0% for 2011. The increase from 28.0% to 33.3% was primarily due to the earnings mix and a decrease in the impact of permanent benefits.

Capital

As of December 31, 2012, total capital was $243.02 billion, consisting of $75.72 billion in total shareholders' equity (common shareholders' equity of $69.52 billion and preferred stock of $6.20 billion) and $167.30 billion in unsecured long-term borrowings. Book value per common share was $144.67, an increase of approximately 11% compared with the end of 2011 and approximately 3% compared with the end of the third quarter of 2012. Tangible book value per common share ⁽³⁾ was $134.06, an increase of approximately 12% compared with the end of 2011 and approximately 3% compared with the end of the third quarter of 2012. Book value and tangible book value per common share are based on common shares outstanding, including restricted stock units granted to employees with no future service requirements, of 480.5 million as of December 31, 2012.

On October 24, 2012, The Goldman Sachs Group, Inc. (Group Inc.) issued 34,000 shares of perpetual 5.95% Non-Cumulative Preferred Stock, Series I (Series I Preferred Stock), for aggregate proceeds of $850 million.

During the year, the firm repurchased 42.0 million shares of its common stock at an average cost per share of $110.31, for a total cost of $4.64 billion, including 12.7 million shares during the fourth quarter at an average cost per share of $120.11, for a total cost of $1.53 billion. The remaining share authorization under the firm's existing repurchase program is 21.5 million shares. ⁽¹²⁾

Under the regulatory capital requirements currently applicable to bank holding companies (Basel 1), the firm's Tier 1 capital ratio ⁽⁶⁾ was 16.7% ⁽⁵⁾ and the firm's Tier 1 common ratio ⁽⁷⁾ was 14.5% ⁽⁵⁾ as of December 31, 2012, up from 15.0% and 13.1%, respectively, compared with September 30, 2012.

Other Balance Sheet and Liquidity Metrics

• The firm's global core excess liquidity (GCE) ⁽⁴⁾ was $175 billion ⁽⁵⁾ as of December 31, 2012 and averaged $173 billion ⁽⁵⁾ for the fourth quarter of 2012, compared with an average of $175 billion for the third quarter of 2012. GCE averaged $172 billion ⁽⁵⁾ for 2012, compared with an average of $166 billion for 2011.
• Total assets^{were $939 billion (5) as of December 31, 2012, compared with $949 billion as of September 30, 2012 and $923 billion as of December 31, 2011.}
• Level 3 assets^{were $47 billion (5) as of December 31, 2012, compared with $48 billion for both September 30, 2012 and December 31, 2011, and represented 5.0% of total assets.}

Dividends

Group, Inc. declared a dividend of $0.50 per common share to be paid on March 28, 2013 to common shareholders of record on February 28, 2013. The firm also declared dividends of $234.38, $387.50, $250.00, $250.00 and $437.99 per share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series I Preferred Stock, respectively (represented by depositary shares, each representing a 1/1,000th interest in a share of preferred stock), to be paid on February 11, 2013 to preferred shareholders of record on January 27, 2013. In addition, the firm declared dividends of $977.78 per each share of Series E Preferred Stock and Series F Preferred Stock, to be paid on March 1, 2013 to preferred shareholders of record on February 14, 2013.

______________

The Goldman Sachs Group, Inc. is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. Founded in 1869, the firm is headquartered in New York and maintains offices in all major financial centers around the world.

Cautionary Note Regarding Forward-Looking Statements

This press release 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 forward-looking statements. For a discussion of some of the risks and important factors that could affect the firm's future results and financial condition, see "Risk Factors" in Part I, Item 1A of the firm's Annual Report on Form 10-K for the year ended December 31, 2011.

Certain of the information regarding the firm's capital ratios, risk-weighted assets, total assets, level 3 assets and global core excess liquidity consist of preliminary estimates. These estimates are forward-looking statements and are subject to change, possibly materially, as the firm completes its financial statements.

Statements about the firm's investment banking transaction backlog also may constitute forward-looking statements. Such statements are subject to the risk that the terms of these transactions may be modified or that they may not be completed at all; therefore, the net revenues, if any, that the firm actually earns from these transactions may differ, possibly materially, from those currently expected. Important factors that could result in a modification of the terms of a transaction or a transaction not being completed include, in the case of underwriting transactions, a decline or continued weakness in general economic conditions, outbreak of hostilities, volatility in the securities markets generally or an adverse development with respect to the issuer of the securities and, in the case of 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. For a discussion of other important factors that could adversely affect the firm's investment banking transactions, see "Risk Factors" in Part I, Item 1A of the firm's Annual Report on Form 10-K for the year ended December 31, 2011.

Conference Call

A conference call to discuss the firm's results, outlook and related matters will be held at 10:30 am (ET). The call will be open to the public. Members of the public who would like to listen to the conference call should dial 1-888-281-7154 (U.S. domestic) or 1-706-679-5627 (international). The number should be dialed at least 10 minutes prior to the start of the conference call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the firm's web site, www.gs.com/shareholders. There is no charge to access the call. For those unable to listen to the live broadcast, a replay will be available on the firm's web site or by dialing 1-855-859-2056 (U.S. domestic) or 1-404-537-3406 (international) passcode number 75327207, beginning approximately two hours after the event. Please direct any questions regarding obtaining access to the conference call to Goldman Sachs Investor Relations, via e-mail, at gs-investor-relations@gs.com.

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
SEGMENT NET REVENUES
(UNAUDITED)
$ in millions

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
SEGMENT NET REVENUES
(UNAUDITED)
$ in millions

	Â	Three Months Ended															Â	Â	Â	% Change From
		December 31,			Â	Â	Â	September 30,			Â	Â	Â	December 31,						September 30,			Â	December 31,
		2012						2012						2011						2012				2011
Investment Banking
Financial Advisory		$	508					$	509					$	470					-		%		8		%
																										Â
Equity underwriting			304						189						191					61				59
Debt underwriting		Â	593	Â				Â	466	Â				Â	196	Â				27	Â			N.M.	Â
Total Underwriting			897						655						387					37				132
		Â		Â				Â		Â				Â						Â	Â			Â	Â
Total Investment Banking		Â	1,405	Â				Â	1,164	Â				Â	857	Â				21	Â			64	Â
																										Â
Institutional Client Services
Fixed Income, Currency and Commodities Client Execution			2,038						2,224						1,363					(8	)			50
																										Â
Equities client execution (13)			764						847						526					(10	)			45
Commissions and fees			722						721						782					-				(8	)
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