NEW YORK--(BUSINESS WIRE)-- The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of $39.16 billion and net earnings of $8.35 billion for the year ended December 31, 2010. Diluted earnings per common share were $13.18 compared with $22.13 for the year ended December 31, 2009. Return on average common shareholders’ equity (ROE) ⁽²⁾ was 11.5% for 2010.

Fourth quarter net revenues were $8.64 billion and net earnings were $2.39 billion. Diluted earnings per common share were $3.79 compared with $8.20 for the fourth quarter of 2009 and $2.98 for the third quarter of 2010. Annualized ROE ⁽²⁾ was 13.1% for the fourth quarter of 2010.

Excluding the impact of the $465 million related to the U.K. bank payroll tax, the $550 million related to the SEC settlement and the $305 million related to the impairment of the firm’s New York Stock Exchange (NYSE) Designated Market Maker (DMM) rights, diluted earnings per common share were $15.22 ⁽¹⁾ and ROE was 13.1% ⁽¹⁾ for the year ended December 31, 2010.

"Market and economic conditions for much of 2010 were difficult, but the firm’s performance benefited from the strength of our global client franchise and the focus and commitment of our people,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “Looking ahead, we are seeing signs of growth and more economic activity and we are well-positioned to help our clients expand their businesses, manage their risks and invest in the future."

_____________

Net Revenues

Investment Banking

Full Year
Net revenues in Investment Banking were $4.81 billion for 2010, 3% lower than 2009. Net revenues in Financial Advisory were $2.06 billion, 9% higher than 2009, primarily reflecting an increase in client activity. Net revenues in the firm’s Underwriting business were $2.75 billion, 11% lower than 2009, reflecting lower net revenues in equity underwriting, principally due to a decline in client activity, as 2009 included significant capital-raising activity by financial institution clients. Net revenues in debt underwriting were essentially unchanged compared with 2009.

Fourth Quarter
Net revenues in Investment Banking were $1.51 billion for the fourth quarter of 2010, 10% lower than the fourth quarter of 2009 and 30% higher than the third quarter of 2010. Net revenues in Financial Advisory were $628 million, 7% lower than the fourth quarter of 2009. Industry-wide completed mergers and acquisitions declined compared with the fourth quarter of 2009. Net revenues in the firm’s Underwriting business were $879 million, 12% lower than a strong fourth quarter of 2009, reflecting lower net revenues in both equity and debt underwriting, principally due to a decline in client activity.

The firm’s investment banking transaction backlog decreased compared with the end of the third quarter of 2010. ⁽⁷⁾

Institutional Client Services

Full Year
Net revenues in Institutional Client Services were $21.80 billion for 2010, 33% lower than 2009.

Net revenues in Fixed Income, Currency and Commodities Client Execution were $13.71 billion for 2010, 37% lower than a particularly strong 2009. During 2010, Fixed Income, Currency and Commodities Client Execution operated in a challenging environment characterized by lower client activity levels, which reflected broad market concerns including European sovereign debt risk and uncertainty over regulatory reform, as well as tighter bid/offer spreads. The decrease in net revenues compared with 2009 primarily reflected significantly lower results in interest rate products, credit products, commodities and, to a lesser extent, currencies. These decreases were partially offset by higher net revenues in mortgages, as 2009 included approximately $1 billion of losses on commercial mortgage-related products.

Net revenues in Equities were $8.09 billion for 2010, 25% lower than 2009, primarily reflecting significantly lower net revenues in equities client execution, principally due to significantly lower results in derivatives and shares. Commissions and fees were also lower than 2009, primarily reflecting lower client activity levels. In addition, securities services net revenues were significantly lower compared with 2009, primarily reflecting tighter securities lending spreads, principally due to the impact of changes in the composition of customer balances, partially offset by the impact of higher average customer balances. During 2010, although equity markets were volatile during the first half of the year, equity prices generally improved and volatility levels declined in the second half of the year.

Fourth Quarter
Net revenues in Institutional Client Services were $3.64 billion for the fourth quarter of 2010, 31% lower than the fourth quarter of 2009 and 22% lower than the third quarter of 2010.

Net revenues in Fixed Income, Currency and Commodities Client Execution were $1.64 billion, 48% lower than the fourth quarter of 2009. During the fourth quarter of 2010, Fixed Income, Currency and Commodities Client Execution continued to operate in a challenging environment characterized by generally low client activity levels, which resulted in lower net revenues across the franchise compared with the fourth quarter of 2009.

Net revenues in Equities were $2.00 billion, 5% lower than the fourth quarter of 2009. This decrease reflected lower net revenues in equities client execution, as well as slightly lower commissions and fees, as client activity levels remained low during the quarter. Securities services net revenues were also lower, primarily reflecting tighter securities lending spreads, principally due to the impact of changes in the composition of customer balances, partially offset by the impact of higher average customer balances. During the quarter, Equities operated in an environment characterized by lower volatility levels and an increase in global equity prices.

Investing & Lending

The firm’s investing and lending activities across various asset classes, primarily including debt securities and loans and equity securities, including private equity and real estate, are included in this segment. These activities include both direct investing and investing through funds, as well as lending activities.

Full Year
Investing & Lending recorded net revenues of $7.54 billion for 2010. These results primarily reflected a gain of $747 million from the firm’s investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC), a net gain of $2.69 billion from other equity securities and a net gain of $2.60 billion from debt securities and loans.

Fourth Quarter
Investing & Lending recorded net revenues of $1.99 billion for the fourth quarter of 2010. These results primarily reflected a gain of $55 million from the firm’s investment in the ordinary shares of ICBC, a net gain of $1.07 billion from other equity securities and a net gain of $537 million from debt securities and loans.

Investment Management

Full Year
Net revenues in Investment Management were $5.01 billion for 2010, 9% higher than 2009, primarily reflecting higher incentive fees across the firm’s alternative investment products. Management and other fees also increased, reflecting favorable changes in the mix of assets under management, as well as the impact of appreciation in the value of client assets. During the year, assets under management decreased 4% to $840 billion, primarily reflecting industry-wide outflows in money market assets.

Fourth Quarter
Net revenues in Investment Management were $1.51 billion for the fourth quarter of 2010, 14% higher than the fourth quarter of 2009 and 18% higher than the third quarter of 2010. The increase in net revenues compared with the fourth quarter of 2009 primarily reflected significantly higher incentive fees. During the quarter, assets under management increased 2% to $840 billion, due to appreciation in the value of client assets and inflows in money market assets.

Expenses

Operating expenses were $26.27 billion for 2010, 4% higher than 2009.

Compensation and Benefits

Compensation and benefits expenses (including salaries, discretionary compensation, amortization of equity awards and other items such as benefits) were $15.38 billion for 2010, a 5% decline compared with $16.19 billion for 2009. The ratio of compensation and benefits to net revenues for 2010 was 39.3% ⁽⁸⁾ (which excludes the impact of the $465 million U.K. bank payroll tax).

U.K. Bank Payroll Tax

During the second quarter of 2010, the United Kingdom enacted legislation that imposed a non-deductible 50% tax on certain financial institutions in respect of discretionary bonuses in excess of £25,000 awarded under arrangements made between December 9, 2009 and April 5, 2010 to “relevant banking employees.” The estimated amount accrued in the second quarter of 2010 related to this tax was finalized during the fourth quarter at $465 million.

Non-Compensation Expenses

Full Year
Non-compensation expenses were $10.43 billion for 2010, 14% higher than 2009. This increase was primarily attributable to the impact of net provisions for litigation and regulatory proceedings of $682 million (including $550 million related to the SEC settlement), and an impairment of the firm’s NYSE DMM rights of $305 million, each during 2010. The remainder of the increase compared with 2009 generally reflected higher professional fees, market development expenses and occupancy expenses. These increases were partially offset by the impact of significantly higher real estate impairment charges during 2009 related to the firm’s consolidated entities held for investment purposes, as well as higher charitable contributions during 2009. During 2010, charitable contributions included $320 million to Goldman Sachs Gives. Compensation was reduced to fund this charitable contribution. The firm will ask its participating managing directors to make recommendations regarding potential charitable recipients for this contribution.

Fourth Quarter
Non-compensation expenses were $3.05 billion, 11% higher than the fourth quarter of 2009 and 35% higher than the third quarter of 2010. The increase compared with the fourth quarter of 2009 was primarily attributable to an impairment of the firm’s NYSE DMM rights of $305 million during the fourth quarter of 2010, as well as higher market development expenses and professional fees. These increases were partially offset by the impact of higher charitable contributions in the fourth quarter of 2009. During the fourth quarter of 2010, charitable contributions included $320 million to Goldman Sachs Gives. The fourth quarter of 2010 also included $19 million of net provisions for litigation and regulatory proceedings.

Provision for Taxes

The effective income tax rate for 2010, excluding the impact of the $465 million U.K. bank payroll tax and the $550 million SEC settlement, substantially all of which is non-deductible, was 32.7% ⁽⁹⁾, essentially unchanged from 2009 and the first nine months of 2010. Including the impact of these amounts, the effective income tax rate was 35.2% for 2010.

Capital

As of December 31, 2010, total capital was $251.76 billion, consisting of $77.36 billion in total shareholders’ equity (common shareholders’ equity of $70.40 billion and preferred stock of $6.96 billion) and $174.40 billion in unsecured long-term borrowings. Book value per common share was $128.72, an increase of approximately 10% compared with the end of 2009 and approximately 1% compared with the end of the third quarter of 2010. Tangible book value per common share ⁽⁴⁾ was $118.63, an increase of approximately 9% compared with the end of 2009 and approximately 2% compared with the end of the third quarter of 2010. 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 546.9 million at period end.

In keeping with the firm’s long-standing policy of repurchasing shares to offset increases in share count over time resulting from employee share-based compensation, the firm repurchased 25.3 million shares of its common stock during 2010 at an average cost per share of $164.48, for a total cost of $4.16 billion, including 6.7 million shares during the fourth quarter at an average cost per share of $163.41, for a total cost of $1.09 billion.

Under the regulatory capital guidelines currently applicable to bank holding companies, the firm’s Tier 1 capital ratio under Basel 1 ⁽⁵⁾ was 16.0% as of December 31, 2010. The firm’s Tier 1 common ratio under Basel 1 ⁽⁶⁾ was 13.3% as of December 31, 2010.

Other Balance Sheet and Liquidity Metrics

• Total assets ⁽¹⁰⁾ were $911 billion as of December 31, 2010, essentially unchanged from the end of the third quarter of 2010 and up 7% from the end of 2009.
• Level 3 assets ⁽¹⁰⁾ were approximately $45 billion as of December 31, 2010 (down from $46 billion at the end of the third quarter of 2010 and the end of 2009) and represented 5% of total assets.
• Average global core excess liquidity (GCE) ⁽¹¹⁾ was $170 billion for the fourth quarter of 2010, down from $175 billion for the third quarter of 2010. GCE averaged $168 billion for 2010, unchanged from the average for 2009, and was $175 billion as of December 31, 2010.

Dividends

The Goldman Sachs Group, Inc. declared a dividend of $0.35 per common share to be paid on March 30, 2011 to common shareholders of record on March 2, 2011. The firm also declared dividends of $239.58, $387.50, $255.56 and $255.56 per share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D 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 10, 2011 to preferred shareholders of record on January 26, 2011. In addition, the firm declared a dividend of $2,500 per share of Series G Preferred Stock to be paid on February 10, 2011 to preferred shareholders of record on January 26, 2011.

______________

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 London, Frankfurt, Tokyo, Hong Kong and other 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 fiscal year ended December 31, 2009 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the firm’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

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 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 fiscal year ended December 31, 2009 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the firm’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

Conference Call

A conference call to discuss the firm’s results, outlook and related matters will be held at 9:30 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 1-800-642-1687 (U.S. domestic) or 1-706-645-9291 (international) passcode number 32157723, 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.

CONTACT:
The Goldman Sachs Group, Inc.
Media Relations:
Lucas van Praag, 212-902-5400

Investor Relations:
Dane E. Holmes, 212-902-0300