The Goldman Sachs Group, Inc. (GS)
Q1 2009 Earnings Call Transcript
April 14, 2009 7:00 a.m. ET

Executives

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

Analysts

Guy Moszkowski – Bank of America/Merrill Lynch
Howard Chen - Credit Suisse
Meredith Whitney - Meredith Whitney Advisory Group
Christopher Kotowski - Oppenheimer & Company
Kian Abouhossein - JPMorgan
Jeff Harte - Sandler O''Neill & Partners L.P.
Lauren Smith – Keefe, Bruyette & Woods
Steve Stelmach – Friedman, Billings, Ramsey & Co.

Presentation

Dane Holmes

Good morning. This is Dane Holmes, Director of Investor Relations at Goldman Sachs. Welcome to our first 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 these 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 the fiscal year ended November 2008. 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, 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, Dane. I''d like to thank all of you for listening this morning. I''ll give an overview of our first quarter 2009 results and then take your questions.

In light of the continued challenging macroeconomic backdrop, I''m pleased to report solid first quarter results for Goldman Sachs. First quarter net revenues were $9.4 billion, net earnings were $1.8 billion, and earnings per diluted share were $3.39. These results generated an annualized return on common equity of 14.3%.

Before reviewing our first quarter results, let''s briefly discuss the month of December. The difficult market environment that we faced during the fourth quarter of 2008 continued into December, with downward pressure on asset values, weak investment banking activity, and lower equity volumes which more than offset continued strength in our FICC franchise businesses. December net revenues were $183 million, net earnings were negative $780 million and earnings per diluted share were negative $2.15.

December results were negatively impacted by $2.7 billion in fair value losses, including approximately $1 billion in non-investment-grade loans, which included approximately $850 million for Lyondell Basell, approximately $625 million in our commercial real estate loans, approximately $525 million related to our real estate principal investment business and $500 million from private investments in our corporate portfolio. December results also included a CVA loss of more than $100 million as a result of a tightening of the firm''s credit spreads. Compensation expense for December was comprised of salaries, severance and amortization of prior year''s awards as no accrual for discretionary compensation was included.

Although the market environment also had its challenges during the first quarter, our results demonstrate the breadth, resiliency and strength of our business model and franchise. The results for several of our businesses, including Mergers and Acquisitions, Equity Underwriting, Security Services, and Principal Investing, reflect extremely difficult operating conditions. However, having established a diverse set of global businesses, strong performance in other franchise business like Rates, Commodities, Currencies, Credit Trading and Asset Management, offset those negative pressures.

Despite more than $2.5 billion of fair value losses in the first quarter, $2.2 billion of revenues and $300 million in additional expenses, we generated an annualized return on common equity of 14.3%.

Our performance in the first quarter was also a byproduct of a significantly altered competitive landscape. Many of our traditional competitors have retreated from the marketplace, either due to financial distress, mergers or a shift in strategic priorities. Throughout this cyclical downturn we have remained committed to serving our clients as an adviser, financier, market maker, asset manager and co-investor.

GS	$158.18	2.40%

click on symbol for profile