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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. | |
For the quarterly period ended June 30, 2010 | ||
or
|
||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. | |
For the transition period from to |
Delaware | 13-4019460 | |
(State or other jurisdiction
of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
|
200 West Street, New York, NY | 10282 | |
(Address of principal executive offices) | (Zip Code) |
Item 1: | Financial Statements (Unaudited) |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions, except per share amounts) | ||||||||||||||||
Revenues
|
||||||||||||||||
Investment banking
|
$ | 917 | $ | 1,440 | $ | 2,101 | $ | 2,263 | ||||||||
Trading and principal investments
|
5,292 | 9,322 | 14,487 | 15,028 | ||||||||||||
Asset management and securities services
|
1,013 | 957 | 1,991 | 1,946 | ||||||||||||
Total
non-interest
revenues
|
7,222 | 11,719 | 18,579 | 19,237 | ||||||||||||
Interest income
|
3,302 | 3,470 | 6,303 | 7,832 | ||||||||||||
Interest expense
|
1,683 | 1,428 | 3,266 | 3,883 | ||||||||||||
Net interest income
|
1,619 | 2,042 | 3,037 | 3,949 | ||||||||||||
Net revenues, including net interest income
|
8,841 | 13,761 | 21,616 | 23,186 | ||||||||||||
Operating expenses
|
||||||||||||||||
Compensation and benefits
|
3,802 | 6,649 | 9,295 | 11,361 | ||||||||||||
U.K. bank payroll tax
|
600 | — | 600 | — | ||||||||||||
Brokerage, clearing, exchange and distribution fees
|
622 | 574 | 1,184 | 1,110 | ||||||||||||
Market development
|
116 | 82 | 226 | 150 | ||||||||||||
Communications and technology
|
186 | 173 | 362 | 346 | ||||||||||||
Depreciation and amortization
|
437 | 426 | 809 | 975 | ||||||||||||
Occupancy
|
274 | 242 | 530 | 483 | ||||||||||||
Professional fees
|
227 | 145 | 409 | 280 | ||||||||||||
Other expenses
|
1,129 | 441 | 1,594 | 823 | ||||||||||||
Total
non-compensation
expenses
|
2,991 | 2,083 | 5,114 | 4,167 | ||||||||||||
Total operating expenses
|
7,393 | 8,732 | 15,009 | 15,528 | ||||||||||||
Pre-tax
earnings
|
1,448 | 5,029 | 6,607 | 7,658 | ||||||||||||
Provision for taxes
|
835 | 1,594 | 2,538 | 2,409 | ||||||||||||
Net earnings
|
613 | 3,435 | 4,069 | 5,249 | ||||||||||||
Preferred stock dividends
|
160 | 717 | 320 | 872 | ||||||||||||
Net earnings applicable to common shareholders
|
$ | 453 | $ | 2,718 | $ | 3,749 | $ | 4,377 | ||||||||
Earnings per common share
|
||||||||||||||||
Basic
|
$ | 0.82 | $ | 5.27 | $ | 6.87 | $ | 8.81 | ||||||||
Diluted
|
0.78 | 4.93 | 6.41 | 8.42 | ||||||||||||
Dividends declared per common share
|
$ | 0.35 | $ | 0.35 | $ | 0.70 | $ | 0.35 | ||||||||
Average common shares outstanding
|
||||||||||||||||
Basic
|
539.8 | 514.1 | 542.9 | 495.7 | ||||||||||||
Diluted
|
580.4 | 551.0 | 585.2 | 520.1 |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
(in millions, except share
|
||||||||
and per share amounts) | ||||||||
Assets
|
||||||||
Cash and cash equivalents
|
$ | 32,601 | $ | 38,291 | ||||
Cash and securities segregated for regulatory and other purposes
(includes $42,532 and $18,853 at fair value as of June 2010
and December 2009, respectively)
|
56,414 | 36,663 | ||||||
Collateralized agreements:
|
||||||||
Securities purchased under agreements to resell and federal
funds sold (includes $169,280 and $144,279 at fair value as of
June 2010 and December 2009, respectively)
|
169,280 | 144,279 | ||||||
Securities borrowed (includes $64,856 and $66,329 at fair value
as of June 2010 and December 2009, respectively)
|
190,079 | 189,939 | ||||||
Receivables from brokers, dealers and clearing organizations
|
13,485 | 12,597 | ||||||
Receivables from customers and counterparties (includes $2,734
and $1,925 at fair value as of June 2010 and
December 2009, respectively)
|
57,261 | 55,303 | ||||||
Trading assets, at fair value (includes $35,643 and $31,485
pledged as collateral as of June 2010 and
December 2009, respectively)
|
334,868 | 342,402 | ||||||
Other assets
|
29,200 | 29,468 | ||||||
Total assets
|
$ | 883,188 | $ | 848,942 | ||||
Liabilities and shareholders’ equity
|
||||||||
Deposits (includes $2,127 and $1,947 at fair value as of
June 2010 and December 2009, respectively)
|
$ | 37,024 | $ | 39,418 | ||||
Collateralized financings:
|
||||||||
Securities sold under agreements to repurchase, at fair value
|
149,908 | 128,360 | ||||||
Securities loaned (includes $1,139 and $6,194 at fair value as
of June 2010 and December 2009, respectively)
|
11,052 | 15,207 | ||||||
Other secured financings (includes $15,887 and $15,228 at fair
value as of June 2010 and December 2009, respectively)
|
25,834 | 24,134 | ||||||
Payables to brokers, dealers and clearing organizations
|
4,745 | 5,242 | ||||||
Payables to customers and counterparties
|
185,531 | 180,392 | ||||||
Trading liabilities, at fair value
|
147,170 | 129,019 | ||||||
Unsecured
short-term
borrowings, including the current portion of unsecured
long-term
borrowings (includes $19,509 and $18,403 at fair value as of
June 2010 and December 2009, respectively)
|
39,123 | 37,516 | ||||||
Unsecured
long-term
borrowings (includes $20,241 and $21,392 at fair value as of
June 2010 and December 2009, respectively)
|
178,582 | 185,085 | ||||||
Other liabilities and accrued expenses (includes $2,992 and
$2,054 at fair value as of June 2010 and
December 2009, respectively)
|
30,400 | 33,855 | ||||||
Total liabilities
|
809,369 | 778,228 | ||||||
Commitments, contingencies and guarantees
|
||||||||
Shareholders’ equity
|
||||||||
Preferred stock, par value $0.01 per share; aggregate
liquidation preference of $8,100 as of both June 2010 and
December 2009
|
6,957 | 6,957 | ||||||
Common stock, par value $0.01 per share;
4,000,000,000 shares authorized, 766,674,337 and
753,412,247 shares issued as of June 2010 and
December 2009, respectively, and 515,486,866 and
515,113,890 shares outstanding as of June 2010 and
December 2009, respectively
|
8 | 8 | ||||||
Restricted stock units and employee stock options
|
6,362 | 6,245 | ||||||
Nonvoting common stock, par value $0.01 per share;
200,000,000 shares authorized, no shares issued and
outstanding
|
— | — | ||||||
Additional
paid-in
capital
|
41,597 | 39,770 | ||||||
Retained earnings
|
53,599 | 50,252 | ||||||
Accumulated other comprehensive loss
|
(318 | ) | (362 | ) | ||||
Stock held in treasury, at cost, par value $0.01 per share;
251,187,473 and 238,298,357 shares as of June 2010 and
December 2009, respectively
|
(34,386 | ) | (32,156 | ) | ||||
Total shareholders’ equity
|
73,819 | 70,714 | ||||||
Total liabilities and shareholders’ equity
|
$ | 883,188 | $ | 848,942 | ||||
Six Months
|
||||||||
Ended | Year Ended | |||||||
June 2010 | December 2009 | |||||||
(in millions) | ||||||||
Preferred stock
|
||||||||
Balance, beginning of year
|
$ | 6,957 | $ | 16,483 | ||||
Accretion
|
— | 48 | ||||||
Repurchased
|
— | (9,574 | ) | |||||
Balance, end of period
|
6,957 | 6,957 | ||||||
Common stock
|
||||||||
Balance, beginning of year
|
8 | 7 | ||||||
Issued
|
— | 1 | ||||||
Balance, end of period
|
8 | 8 | ||||||
Restricted stock units and employee stock options
|
||||||||
Balance, beginning of year
|
6,245 | 9,463 | ||||||
Issuance and amortization of restricted stock units and employee
stock options
|
2,643 | 2,064 | ||||||
Delivery of common stock underlying restricted stock units
|
(2,457 | ) | (5,206 | ) | ||||
Forfeiture of restricted stock units and employee stock options
|
(64 | ) | (73 | ) | ||||
Exercise of employee stock options
|
(5 | ) | (3 | ) | ||||
Balance, end of period
|
6,362 | 6,245 | ||||||
Additional
paid-in
capital
|
||||||||
Balance, beginning of year
|
39,770 | 31,070 | ||||||
Issuance of common stock
|
— | 5,750 | ||||||
Repurchase of common stock warrants
|
— | (1,100 | ) | |||||
Delivery of common stock underlying restricted stock units and
proceeds from the exercise of employee stock options
|
2,672 | 5,708 | ||||||
Cancellation of restricted stock units in satisfaction of
withholding tax requirements
|
(962 | ) | (863 | ) | ||||
Excess net tax benefit/(provision) related to
share-based
compensation
|
118 | (793 | ) | |||||
Cash settlement of
share-based
compensation
|
(1 | ) | (2 | ) | ||||
Balance, end of period
|
41,597 | 39,770 | ||||||
Retained earnings
|
||||||||
Balance, beginning of year
|
50,252 | 38,579 | ||||||
Net earnings
|
4,069 | 13,385 | ||||||
Dividends and dividend equivalents declared on common stock and
restricted stock units
|
(402 | ) | (588 | ) | ||||
Dividends declared on preferred stock
|
(320 | ) | (1,076 | ) | ||||
Preferred stock accretion
|
— | (48 | ) | |||||
Balance, end of period
|
53,599 | 50,252 | ||||||
Accumulated other comprehensive income/(loss)
|
||||||||
Balance, beginning of year
|
(362 | ) | (372 | ) | ||||
Currency translation adjustment, net of tax
|
(14 | ) | (70 | ) | ||||
Pension and postretirement liability adjustments, net of tax
|
11 | (17 | ) | |||||
Net unrealized gains on
available-for-sale
securities, net of tax
|
47 | 97 | ||||||
Balance, end of period
|
(318 | ) | (362 | ) | ||||
Stock held in treasury, at cost
|
||||||||
Balance, beginning of year
|
(32,156 | ) | (32,176 | ) | ||||
Repurchased
|
(2,269 | ) | (2 | ) (1) | ||||
Reissued
|
39 | 22 | ||||||
Balance, end of period
|
(34,386 | ) | (32,156 | ) | ||||
Total shareholders’ equity
|
$ | 73,819 | $ | 70,714 | ||||
(1) | Relates primarily to repurchases of common stock by a broker-dealer subsidiary to facilitate customer transactions in the ordinary course of business and shares withheld to satisfy withholding tax requirements. |
Six Months
|
||||||||
Ended June | ||||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Cash flows from operating activities
|
||||||||
Net earnings
|
$ | 4,069 | $ | 5,249 | ||||
Non-cash
items included in net earnings
|
||||||||
Depreciation and amortization
|
815 | 1,176 | ||||||
Share-based
compensation
|
2,594 | 907 | ||||||
Changes in operating assets and liabilities
|
||||||||
Cash and securities segregated for regulatory and other purposes
|
(19,748 | ) | 58,895 | |||||
Net receivables from brokers, dealers and clearing organizations
|
(1,336 | ) | 2,715 | |||||
Net payables to customers and counterparties
|
3,263 | (37,786 | ) | |||||
Securities borrowed, net of securities loaned
|
(4,296 | ) | (16,490 | ) | ||||
Securities sold under agreements to repurchase, net of
securities purchased under agreements to resell and federal
funds sold
|
(3,452 | ) | (136,246 | ) | ||||
Trading assets, at fair value
|
16,823 | 172,389 | ||||||
Trading liabilities, at fair value
|
18,145 | (38,731 | ) | |||||
Other, net
|
(14,428 | ) | 3,942 | |||||
Net cash provided by operating activities
|
2,449 | 16,020 | ||||||
Cash flows from investing activities
|
||||||||
Purchase of property, leasehold improvements and equipment
|
(452 | ) | (653 | ) | ||||
Proceeds from sales of property, leasehold improvements and
equipment
|
49 | 50 | ||||||
Business acquisitions, net of cash acquired
|
(753 | ) | (208 | ) | ||||
Proceeds from sales of investments
|
445 | 140 | ||||||
Purchase of
available-for-sale
securities
|
(1,248 | ) | (1,904 | ) | ||||
Proceeds from sales of
available-for-sale
securities
|
1,269 | 1,803 | ||||||
Net cash used for investing activities
|
(690 | ) | (772 | ) | ||||
Cash flows from financing activities
|
||||||||
Unsecured
short-term
borrowings, net
|
204 | (10,965 | ) | |||||
Other secured financings
(short-term),
net
|
1,392 | (6,531 | ) | |||||
Proceeds from issuance of other secured financings
(long-term)
|
1,752 | 3,400 | ||||||
Repayment of other secured financings
(long-term),
including the current portion
|
(2,528 | ) | (2,850 | ) | ||||
Proceeds from issuance of unsecured
long-term
borrowings
|
9,518 | 20,875 | ||||||
Repayment of unsecured
long-term
borrowings, including the current portion
|
(13,458 | ) | (16,805 | ) | ||||
Preferred stock repurchased
|
— | (9,574 | ) | |||||
Derivative contracts with a financing element, net
|
536 | 1,815 | ||||||
Deposits, net
|
(2,394 | ) | 9,327 | |||||
Common stock repurchased
|
(2,269 | ) | (2 | ) | ||||
Dividends and dividend equivalents paid on common stock,
preferred stock and restricted stock units
|
(722 | ) | (1,495 | ) | ||||
Proceeds from issuance of common stock, including stock option
exercises
|
250 | 5,893 | ||||||
Excess tax benefit related to
share-based
compensation
|
271 | 38 | ||||||
Cash settlement of
share-based
compensation
|
(1 | ) | (2 | ) | ||||
Net cash used for financing activities
|
(7,449 | ) | (6,876 | ) | ||||
Net increase/(decrease) in cash and cash equivalents
|
(5,690 | ) | 8,372 | |||||
Cash and cash equivalents, beginning of year
|
38,291 | 13,805 | ||||||
Cash and cash equivalents, end of period
|
$ | 32,601 | $ | 22,177 | ||||
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Net earnings
|
$ | 613 | $ | 3,435 | $ | 4,069 | $ | 5,249 | ||||||||
Currency translation adjustment, net of tax
|
(10 | ) | (54 | ) | (14 | ) | (29 | ) | ||||||||
Pension and postretirement liability adjustments, net of tax
|
5 | 8 | 11 | 17 | ||||||||||||
Net unrealized gains on
available-for-sale
securities, net of tax
|
43 | 53 | 47 | 34 | ||||||||||||
Comprehensive income
|
$ | 651 | $ | 3,442 | $ | 4,113 | $ | 5,271 | ||||||||
Note 1. | Description of Business |
• | Investment Banking. The firm provides a broad range of investment banking services to a diverse group of corporations, financial institutions, investment funds, governments and individuals. | |
• | Trading and Principal Investments. The firm facilitates client transactions with a diverse group of corporations, financial institutions, investment funds, governments and individuals through market making in, trading of and investing in fixed income and equity products, currencies, commodities and derivatives on these products. The firm also takes proprietary positions on certain of these products. In addition, the firm engages in market-making activities on equities and options exchanges, and the firm clears client transactions on major stock, options and futures exchanges worldwide. In connection with the firm’s merchant banking and other investing activities, the firm makes principal investments directly and through funds that the firm raises and manages. | |
• | Asset Management and Securities Services. The firm provides investment and wealth advisory services and offers investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse group of institutions and individuals worldwide and provides prime brokerage services, financing services and securities lending services to institutional clients, including hedge funds, mutual funds, pension funds and foundations, and to high-net-worth individuals worldwide. |
Note 2. | Significant Accounting Policies |
• | Voting Interest Entities. Voting interest entities are entities in which (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial |
interest in a voting interest entity is ownership of a majority voting interest. Accordingly, the firm consolidates voting interest entities in which it has a majority voting interest. |
• | Variable Interest Entities. VIEs are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when an enterprise has a variable interest, or a combination of variable interests, that provides the enterprise with (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. The firm determines whether it is the primary beneficiary of a VIE by performing an analysis that principally considers: (i) the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders, (ii) the VIE’s capital structure, (iii) the terms between the VIE and its variable interest holders and other parties involved with the VIE, (iv) which variable interest holders have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, (v) which variable interest holders have the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE and (vi) related party relationships. The firm reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events. The firm reassesses its determination of whether the firm is the primary beneficiary of a VIE upon changes in facts and circumstances that could potentially alter the firm’s assessment. See “— Recent Accounting Developments” below for further information regarding accounting for VIEs. |
• | Equity-Method Investments. When the firm does not have a controlling financial interest in an entity but exerts significant influence over the entity’s operating and financial policies (generally defined as owning a voting interest of 20% to 50%) and has an investment in common stock or in-substance common stock, the firm accounts for its investment either under the equity method of accounting or at fair value pursuant to the fair value option available under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 825-10. In general, the firm accounts for investments acquired subsequent to November 24, 2006, when the fair value option became available, at fair value. In certain cases, the firm applies the equity method of accounting to new investments that are strategic in nature or closely related to the firm’s principal business activities, where the firm has a significant degree of involvement in the cash flows or operations of the investee, or where cost-benefit considerations are less significant. See “— Revenue Recognition — Other Financial Assets and Financial Liabilities at Fair Value” below for a discussion of the firm’s application of the fair value option. | |
• | Other. If the firm does not consolidate an entity or apply the equity method of accounting, the firm accounts for its investment at fair value. The firm also has formed numerous nonconsolidated investment funds with third-party investors that are typically organized as limited partnerships. The firm acts as general partner for these funds and generally does not hold a majority of the economic interests in these funds. The firm has generally provided the third-party investors with rights to terminate the funds or to remove the firm as the general partner. As a result, the firm does not consolidate these funds. Investments in these funds are included in “Trading assets, at fair value” in the condensed consolidated statements of financial condition. |
• | certain unsecured short-term borrowings, consisting of all promissory notes and commercial paper and certain hybrid financial instruments; | |
• | certain other secured financings, primarily transfers of financial assets accounted for as financings rather than sales, debt raised through the firm’s William Street credit extension program and certain other nonrecourse financings; | |
• | certain unsecured long-term borrowings, including prepaid physical commodity transactions and certain hybrid financial instruments; | |
• | resale and repurchase agreements; | |
• | securities borrowed and loaned within Trading and Principal Investments, consisting of the firm’s matched book and certain firm financing activities; | |
• | certain deposits issued by the firm’s bank subsidiaries, as well as securities held by Goldman Sachs Bank USA (GS Bank USA); | |
• | certain receivables from customers and counterparties, including certain margin loans, transfers of financial assets accounted for as secured loans rather than purchases and prepaid variable share forwards; | |
• | certain insurance and reinsurance contracts and certain guarantees; | |
• | certain subordinated liabilities issued by consolidated VIEs; and | |
• | in general, investments acquired after November 24, 2006, when the fair value option became available, where the firm has significant influence over the investee and would otherwise apply the equity method of accounting. |
Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; |
Level 2 | Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly; | |
Level 3 | Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. |
• | Cash instruments. The firm’s cash instruments are generally classified within level 1 or level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted prices in active markets include U.S. and non-U.S. government obligations, actively traded listed equities and certain money market instruments. These instruments are generally classified within level 1 of the fair value hierarchy. Instruments classified within level 1 of the fair value hierarchy are required to be carried at quoted market prices, even in situations where the firm holds a large position and a sale could reasonably impact the quoted price. |
• | Derivative contracts. Derivative contracts are instruments such as futures, forwards, swaps or option contracts that derive their value from underlying asset prices, indices, reference rates and other inputs or a combination of these factors. Derivative instruments may be privately negotiated contracts, which are often referred to as over-the-counter (OTC) derivatives, or they may be listed and traded on an exchange. The assets and inputs underlying derivative instruments may include financial instruments (such as government and corporate bonds, mortgage and other asset-backed loans and securities and bank loans), currencies, commodities, interest rates and related indices. |
• | Equities and convertible debentures. For private equity investments, recent third-party investments or pending transactions are considered to be the best evidence for any change in |
fair value. In the absence of such evidence, valuations are based on one or more of the following methodologies, as appropriate and available: transactions in similar instruments, discounted cash flow techniques, third-party independent appraisals, valuation multiples and public comparables. Such evidence includes pending reorganizations (e.g., merger proposals, tender offers or debt restructurings), and significant changes in financial metrics (e.g., operating results as compared to previous projections, industry multiples, credit ratings and balance sheet ratios). Real estate fund investments are carried at net asset value per share. The underlying investments in the funds are generally valued using discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows, capitalization rates and valuation multiples. |
• | Bank loans and bridge loans, Corporate debt securities, State and municipal obligations and Other debt obligations. Valuations are generally based on discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows, market yields and recovery assumptions. The significant inputs are generally determined based on relative value analyses, which incorporate comparisons both to credit default swaps that reference the same underlying credit risk and to other debt instruments for the same issuer for which observable prices or broker quotes are available. | |
• | Loans and securities backed by commercial real estate. Loans and securities backed by commercial real estate are collateralized by specific assets and may be tranched into varying levels of subordination. Due to the nature of these instruments, valuation techniques vary by instrument, but are generally based on relative value analyses, discounted cash flow techniques or a combination thereof. Significant inputs for these valuations include transactions in both the underlying collateral and instruments with the same or substantially the same underlying collateral, credit default swap prices, current levels and trends of market indices (such as the CMBX), market yields and other factors (such as the operating income generated by the underlying collateral) which are used in determining the amount and timing of expected future cash flows. | |
• | Loans and securities backed by residential real estate. Valuations are based on both proprietary and industry recognized models (including Intex and Bloomberg), and discounted cash flow techniques. The most significant inputs to the valuation of these instruments are the rates and timing of delinquencies, the rates and timing of prepayments, and default and loss expectations, which are driven in part by housing prices. The significant inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices such as the ABX. | |
• | Loan portfolios. Loan portfolios are acquired portfolios of distressed loans, primarily backed by commercial and residential real estate collateral. Valuations are based on discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows and market yields. The significant inputs are determined based on relative value analyses which incorporate comparisons to recent auction data for other similar loan portfolios. | |
• | Derivative contracts. Certain OTC derivatives trade in less liquid markets with limited pricing information and the determination of fair value for these derivatives is inherently more difficult. The valuations of these less liquid OTC derivatives are typically based on level 1 and/or level 2 inputs that can be observed in the market, as well as unobservable level 3 inputs. Unobservable inputs typically include certain correlations as well as credit spreads, equity volatilities, commodity prices and commodity volatilities that are long-dated or derived from trading activity in inactive or less liquid markets. When unobservable inputs to a valuation |
model are significant to the fair value measurement of an instrument, the instrument is classified within level 3 of the fair value hierarchy. Subsequent to initial recognition, the firm updates the level 1 and level 2 inputs to reflect observable market changes with resulting gains and losses reflected within level 3. Level 3 inputs are only changed when corroborated by evidence such as similar market transactions, third-party pricing services and/or broker or dealer quotations, or other empirical market data. In circumstances where the firm cannot verify the model value to market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. |
• | Resale and Repurchase Agreements and Securities Borrowed and Loaned. The significant inputs to the valuation of resale and repurchase agreements and securities borrowed and loaned within Trading and Principal Investments (which are related to the firm’s matched book and certain firm financing activities) are the amount and timing of expected future cash flows, interest rates and collateral funding spreads. | |
• | Other Secured Financings. The significant inputs to the valuation of other secured financings at fair value, including transfers of financial assets accounted for as financings rather than sales, debt raised through the firm’s William Street credit extension program and certain other nonrecourse financings, are the amount and timing of expected future cash flows, interest rates, the fair value of the collateral delivered by the firm (which is determined using the amount and timing of expected future cash flows, market yields and recovery assumptions), the frequency of additional collateral calls and the credit spreads of the firm. | |
• | Unsecured short-term and long-term borrowings. The significant inputs to the valuation of certain short-term and long-term borrowings at fair value, including all promissory notes and commercial paper, certain hybrid financial instruments and prepaid physical commodity transactions, are the amount and timing of expected future cash flows, interest rates, the credit spreads of the firm, as well as commodity prices in the case of prepaid physical commodity transactions and, for certain hybrid financial instruments, equity prices, inflation rates and index levels. | |
• | Receivables from customers and counterparties. The significant inputs to the valuation of certain receivables from customers and counterparties, including certain margin loans, transfers of financial assets accounted for as secured loans rather than purchases and prepaid variable share forwards, are interest rates and the amount and timing of expected future cash flows. | |
• | Insurance and reinsurance contracts. Insurance and reinsurance contracts at fair value are included in “Receivables from customers and counterparties” and “Other liabilities and accrued expenses” in the firm’s condensed consolidated statements of financial condition. These contracts are valued using market transactions and other market evidence where possible, including market-based inputs to models, calibration to market-clearing transactions or other alternative pricing sources with reasonable levels of price transparency. Significant level 2 inputs typically include interest rates and inflation risk. Significant level 3 inputs typically include mortality or funding |
benefit assumptions. When unobservable inputs to a valuation model are significant to the fair value measurement of an instrument, the instrument is classified within level 3 of the fair value hierarchy. |
• | Deposits. The significant inputs to the valuation of deposits are interest rates. |
• | Resale and Repurchase Agreements. Securities purchased under agreements to resell and securities sold under agreements to repurchase, principally U.S. government, federal agency and investment-grade sovereign obligations, represent collateralized financing transactions. The firm receives securities purchased under agreements to resell, makes delivery of securities sold under agreements to repurchase, monitors the market value of these securities on a daily basis and delivers or obtains additional collateral as appropriate. As noted above, resale and repurchase agreements are carried in the condensed consolidated statements of financial condition at fair value under the fair value option. | |
• | Securities Borrowed and Loaned. Securities borrowed and loaned are generally collateralized by cash, securities or letters of credit. The firm receives securities borrowed, makes delivery of securities loaned, monitors the market value of securities borrowed and loaned, and delivers or obtains additional collateral as appropriate. Securities borrowed and loaned within Securities Services, relating to both customer activities and, to a lesser extent, certain firm financing activities, are recorded based on the amount of cash collateral advanced or received plus accrued interest. As these arrangements generally can be terminated on demand, they exhibit little, if any, sensitivity to changes in interest rates. As noted above, securities borrowed and loaned within Trading and Principal Investments, which are related to the firm’s matched book and certain firm financing activities, are recorded at fair value under the fair value option. | |
• | Other Secured Financings. In addition to repurchase agreements and securities loaned, the firm funds assets through the use of other secured financing arrangements and pledges financial instruments and other assets as collateral in these transactions. As noted above, the firm has elected to apply the fair value option to transfers of financial assets accounted for as financings rather than sales, debt raised through the firm’s William Street credit extension program and certain other nonrecourse financings, for which the use of fair value eliminates non-economic volatility in earnings that would arise from using different measurement attributes. Other secured financings that are not recorded at fair value are recorded based on the amount of cash received plus accrued interest. See Note 3 for further information regarding other secured financings. |
Note 3. | Financial Instruments |
As of | ||||||||||||||||
June 2010 | December 2009 | |||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
(in millions) | ||||||||||||||||
Commercial paper, certificates of deposit, time deposits and
other money market instruments
|
$ | 10,449 | (1) | $ | — | $ | 9,111 | (1) | $ | — | ||||||
U.S. government and federal agency obligations
|
83,344 | 19,148 | 78,336 | 20,982 | ||||||||||||
Non-U.S. government
obligations
|
40,789 | 29,875 | 38,858 | 23,843 | ||||||||||||
Mortgage and other
asset-backed
loans and securities: |
||||||||||||||||
Loans and securities backed by commercial real estate
|
5,859 | 24 | 6,203 | 29 | ||||||||||||
Loans and securities backed by residential real estate
|
6,219 | 42 | 6,704 | 74 | ||||||||||||
Loan portfolios
|
1,258 | (2) | — | 1,370 | (2) | — | ||||||||||
Bank loans and bridge loans
|
17,776 | 1,679 | (5) | 19,345 | 1,541 | (5) | ||||||||||
Corporate debt securities
|
24,386 | 7,243 | 26,368 | 6,229 | ||||||||||||
State and municipal obligations
|
2,393 | — | 2,759 | 36 | ||||||||||||
Other debt obligations
|
3,851 | — | 2,914 | — | ||||||||||||
Equities and convertible debentures
|
57,165 | 31,548 | 71,474 | 20,253 | ||||||||||||
Physical commodities
|
1,578 | 37 | 3,707 | 23 | ||||||||||||
Derivative contracts
|
79,801 | (3) | 57,574 | (6) | 75,253 | (3) | 56,009 | (6) | ||||||||
Total
|
$ | 334,868 | (4) | $ | 147,170 | $ | 342,402 | (4) | $ | 129,019 | ||||||
(1) | Includes $4.08 billion and $4.31 billion as of June 2010 and December 2009, respectively, of money market instruments held by William Street Funding Corporation (Funding Corp.) to support the William Street credit extension program. See Note 8 for further information regarding the William Street credit extension program. | |
(2) | Consists of acquired portfolios of distressed loans, primarily backed by commercial and residential real estate collateral. | |
(3) | Net of cash received pursuant to credit support agreements of $113.76 billion and $124.60 billion as of June 2010 and December 2009, respectively. | |
(4) | Includes $3.96 billion and $3.86 billion as of June 2010 and December 2009, respectively, of securities accounted for as available-for-sale, substantially all of which is held within the firm’s insurance subsidiaries. | |
(5) | Includes the fair value of unfunded commitments to extend credit. The fair value of partially funded commitments is included in trading assets, at fair value. | |
(6) | Net of cash posted pursuant to credit support agreements of $17.65 billion and $14.74 billion as of June 2010 and December 2009, respectively. |
As of | ||||||||||||
June
|
March
|
December
|
||||||||||
2010 | 2010 | 2009 | ||||||||||
($ in millions) | ||||||||||||
Total level 3 assets
|
$ | 46,125 | $ | 45,153 | $ | 46,475 | ||||||
Level 3 assets for which the firm bears economic
exposure
(1)
|
43,516 | 42,513 | 43,348 | |||||||||
Total assets
|
883,188 | 880,528 | 848,942 | |||||||||
Total financial assets at fair value
|
614,270 | 606,238 | 573,788 | |||||||||
Total level 3 assets as a percentage of Total assets
|
5.2 | % | 5.1 | % | 5.5 | % | ||||||
Level 3 assets for which the firm bears economic exposure
as a percentage of Total assets
|
4.9 | 4.8 | 5.1 | |||||||||
Total level 3 assets as a percentage of Total financial
assets at fair value
|
7.5 | 7.4 | 8.1 | |||||||||
Level 3 assets for which the firm bears economic exposure
as a percentage of Total financial assets at fair value
|
7.1 | 7.0 | 7.6 |
(1) | Excludes assets which are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds. |
Financial Assets at Fair Value as of June 2010 | ||||||||||||||||||||
Netting and
|
||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Commercial paper, certificates of deposit, time deposits and
other money market instruments
|
$ | 4,380 | $ | 6,069 | $ | — | $ | — | $ | 10,449 | ||||||||||
U.S. government and federal agency obligations
|
37,177 | 46,167 | — | — | 83,344 | |||||||||||||||
Non-U.S. government
obligations
|
37,077 | 3,712 | — | — | 40,789 | |||||||||||||||
Mortgage and other
asset-backed
loans and
securities
(1)
:
|
||||||||||||||||||||
Loans and securities backed by commercial real estate
|
— | 1,991 | 3,868 | — | 5,859 | |||||||||||||||
Loans and securities backed by residential real estate
|
— | 4,095 | 2,124 | — | 6,219 | |||||||||||||||
Loan portfolios
|
— | — | 1,258 | — | 1,258 | |||||||||||||||
Bank loans and bridge loans
|
— | 8,203 | 9,573 | — | 17,776 | |||||||||||||||
Corporate debt
securities
(2)
|
137 | 21,657 | 2,592 | — | 24,386 | |||||||||||||||
State and municipal obligations
|
— | 1,568 | 825 | — | 2,393 | |||||||||||||||
Other debt obligations
|
— | 2,475 | 1,376 | — | 3,851 | |||||||||||||||
Equities and convertible debentures
|
37,845 | (4) | 8,985 | (6) | 10,335 | (8) | — | 57,165 | ||||||||||||
Physical commodities
|
— | 1,578 | — | — | 1,578 | |||||||||||||||
Total cash instruments
|
116,616 | 106,500 | 31,951 | — | 255,067 | |||||||||||||||
Derivative contracts
|
284 | 181,600 | 13,956 | (116,039 | ) (9) | 79,801 | ||||||||||||||
Trading assets, at fair value
|
116,900 | 288,100 | 45,907 | (116,039 | ) | 334,868 | ||||||||||||||
Securities segregated for regulatory and other purposes
|
20,760 | (5) | 21,772 | (7) | — | — | 42,532 | |||||||||||||
Securities purchased under agreements to resell
|
— | 169,280 | — | — | 169,280 | |||||||||||||||
Securities borrowed
|
— | 64,856 | — | — | 64,856 | |||||||||||||||
Receivables from customers and counterparties
|
— | 2,516 | 218 | — | 2,734 | |||||||||||||||
Total financial assets at fair value
|
$ | 137,660 | $ | 546,524 | $ | 46,125 | $ | (116,039 | ) | $ | 614,270 | |||||||||
Level 3 assets for which the firm does not bear economic
exposure
(3)
|
(2,609 | ) | ||||||||||||||||||
Level 3 assets for which the firm bears economic exposure
|
$ | 43,516 | ||||||||||||||||||
(1) | Includes $7 million and $655 million of collateralized debt obligations (CDOs) backed by real estate within level 2 and level 3, respectively, of the fair value hierarchy. |
(2) | Includes $315 million and $775 million of CDOs and collateralized loan obligations (CLOs) backed by corporate obligations within level 2 and level 3, respectively, of the fair value hierarchy. |
(3) | Consists of level 3 assets which are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds. |
(4) | Consists of publicly listed equity securities. Includes the firm’s $9.68 billion investment in the ordinary shares of Industrial and Commercial Bank of China Limited, which was transferred from level 2 within the fair value hierarchy upon expiration of transfer restrictions in April 2010. |
(5) | Principally consists of U.S. Department of the Treasury (U.S. Treasury) securities and money market instruments as well as insurance separate account assets measured at fair value. |
(6) | Principally consists of less liquid publicly listed securities. |
(7) | Principally consists of securities borrowed and resale agreements. The underlying securities have been segregated to satisfy certain regulatory requirements. |
(8) | Includes $9.24 billion of private equity investments, $918 million of real estate investments and $180 million of convertible debentures. |
(9) | Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level. |
Financial Liabilities at Fair Value as of June 2010 | ||||||||||||||||||||
Netting and
|
||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
U.S. government and federal agency obligations
|
$ | 18,323 | $ | 825 | $ | — | $ | — | $ | 19,148 | ||||||||||
Non-U.S. government
obligations
|
29,532 | 343 | — | — | 29,875 | |||||||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||||||||||
Loans and securities backed by commercial real estate
|
— | 24 | — | — | 24 | |||||||||||||||
Loans and securities backed by residential real estate
|
— | 42 | — | — | 42 | |||||||||||||||
Bank loans and bridge loans
|
— | 1,182 | 497 | — | 1,679 | |||||||||||||||
Corporate debt
securities
(1)
|
62 | 7,090 | 91 | — | 7,243 | |||||||||||||||
Equities and convertible
debentures
(2)
|
30,005 | 1,536 | 7 | — | 31,548 | |||||||||||||||
Physical commodities
|
— | 37 | — | — | 37 | |||||||||||||||
Total cash instruments
|
77,922 | 11,079 | 595 | — | 89,596 | |||||||||||||||
Derivative contracts
|
82 | 71,333 | 6,084 | (19,925 | ) (4) | 57,574 | ||||||||||||||
Trading liabilities, at fair value
|
78,004 | 82,412 | 6,679 | (19,925 | ) | 147,170 | ||||||||||||||
Deposits
|
— | 2,127 | — | — | 2,127 | |||||||||||||||
Securities sold under agreements to repurchase, at fair value
|
— | 148,489 | 1,419 | — | 149,908 | |||||||||||||||
Securities loaned
|
— | 1,139 | — | — | 1,139 | |||||||||||||||
Other secured financings
|
— | 7,801 | 8,086 | — | 15,887 | |||||||||||||||
Unsecured
short-term
borrowings
|
— | 16,741 | 2,768 | — | 19,509 | |||||||||||||||
Unsecured
long-term
borrowings
|
— | 18,342 | 1,899 | — | 20,241 | |||||||||||||||
Other liabilities and accrued expenses
|
— | 606 | 2,386 | — | 2,992 | |||||||||||||||
Total financial liabilities at fair value
|
$ | 78,004 | $ | 277,657 | $ | 23,237 | (3) | $ | (19,925 | ) | $ | 358,973 | ||||||||
(1) | Includes $11 million and $82 million of CDOs and CLOs backed by corporate obligations within level 2 and level 3, respectively, of the fair value hierarchy. |
(2) | Substantially all consists of publicly listed equity securities. |
(3) | Level 3 liabilities were 6.5% of Total financial liabilities at fair value. |
(4) | Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level. |
Financial Assets at Fair Value as of December 2009 | ||||||||||||||||||||
Netting and
|
||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Commercial paper, certificates of deposit, time deposits and
other money market instruments
|
$ | 5,026 | $ | 4,085 | $ | — | $ | — | $ | 9,111 | ||||||||||
U.S. government and federal agency obligations
|
36,391 | 41,945 | — | — | 78,336 | |||||||||||||||
Non-U.S. government
obligations
|
33,881 | 4,977 | — | — | 38,858 | |||||||||||||||
Mortgage and other
asset-backed
loans and
securities
(1)
:
|
||||||||||||||||||||
Loans and securities backed by commercial real estate
|
— | 1,583 | 4,620 | — | 6,203 | |||||||||||||||
Loans and securities backed by residential real estate
|
— | 4,824 | 1,880 | — | 6,704 | |||||||||||||||
Loan portfolios
|
— | 6 | 1,364 | — | 1,370 | |||||||||||||||
Bank loans and bridge loans
|
— | 9,785 | 9,560 | — | 19,345 | |||||||||||||||
Corporate debt
securities
(2)
|
164 | 23,969 | 2,235 | — | 26,368 | |||||||||||||||
State and municipal obligations
|
— | 1,645 | 1,114 | — | 2,759 | |||||||||||||||
Other debt obligations
|
— | 679 | 2,235 | — | 2,914 | |||||||||||||||
Equities and convertible debentures
|
37,103 | (4) | 22,500 | (6) | 11,871 | (9) | — | 71,474 | ||||||||||||
Physical commodities
|
— | 3,707 | — | — | 3,707 | |||||||||||||||
Total cash instruments
|
112,565 | 119,705 | 34,879 | — | 267,149 | |||||||||||||||
Derivative contracts
|
161 | 190,816 | (7) | 11,596 | (7) | (127,320 | ) (10) | 75,253 | ||||||||||||
Trading assets, at fair value
|
112,726 | 310,521 | 46,475 | (127,320 | ) | 342,402 | ||||||||||||||
Securities segregated for regulatory and other purposes
|
14,381 | (5) | 4,472 | (8) | — | — | 18,853 | |||||||||||||
Securities purchased under agreements to resell
|
— | 144,279 | — | — | 144,279 | |||||||||||||||
Securities borrowed
|
— | 66,329 | — | — | 66,329 | |||||||||||||||
Receivables from customers and counterparties
|
— | 1,925 | — | — | 1,925 | |||||||||||||||
Total financial assets at fair value
|
$ | 127,107 | $ | 527,526 | $ | 46,475 | $ | (127,320 | ) | $ | 573,788 | |||||||||
Level 3 assets for which the firm does not bear economic
exposure
(3)
|
(3,127 | ) | ||||||||||||||||||
Level 3 assets for which the firm bears economic exposure
|
$ | 43,348 | ||||||||||||||||||
(1) | Includes $291 million and $311 million of CDOs and CLOs backed by real estate within level 2 and level 3, respectively, of the fair value hierarchy. | |
(2) | Includes $338 million and $741 million of CDOs and CLOs backed by corporate obligations within level 2 and level 3, respectively, of the fair value hierarchy. | |
(3) | Consists of level 3 assets which are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds. | |
(4) | Consists of publicly listed equity securities. | |
(5) | Principally consists of U.S. Treasury securities and money market instruments as well as insurance separate account assets measured at fair value. | |
(6) | Substantially all consists of less liquid publicly listed securities. | |
(7) | Includes $31.44 billion and $9.58 billion of credit derivative assets within level 2 and level 3, respectively, of the fair value hierarchy. These amounts exclude the effects of netting under enforceable netting agreements across other derivative product types. | |
(8) | Principally consists of securities borrowed and resale agreements. The underlying securities have been segregated to satisfy certain regulatory requirements. | |
(9) | Includes $10.56 billion of private equity investments, $1.23 billion of real estate investments and $79 million of convertible debentures. |
(10) | Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level. |
Financial Liabilities at Fair Value as of December 2009 | ||||||||||||||||||||
Netting and
|
||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
U.S. government and federal agency obligations
|
$ | 20,940 | $ | 42 | $ | — | $ | — | $ | 20,982 | ||||||||||
Non-U.S. government
obligations
|
23,306 | 537 | — | — | 23,843 | |||||||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||||||||||
Loans and securities backed by commercial real estate
|
— | 29 | — | — | 29 | |||||||||||||||
Loans and securities backed by residential real estate
|
— | 74 | — | — | 74 | |||||||||||||||
Bank loans and bridge loans
|
— | 1,128 | 413 | — | 1,541 | |||||||||||||||
Corporate debt
securities
(1)
|
65 | 6,018 | 146 | — | 6,229 | |||||||||||||||
State and municipal obligations
|
— | 36 | — | — | 36 | |||||||||||||||
Equities and convertible
debentures
(2)
|
19,072 | 1,168 | 13 | — | 20,253 | |||||||||||||||
Physical commodities
|
— | 23 | — | — | 23 | |||||||||||||||
Total cash instruments
|
63,383 | 9,055 | 572 | — | 73,010 | |||||||||||||||
Derivative contracts
|
126 | 66,943 | (3) | 6,400 | (3) | (17,460 | ) (5) | 56,009 | ||||||||||||
Trading liabilities, at fair value
|
63,509 | 75,998 | 6,972 | (17,460 | ) | 129,019 | ||||||||||||||
Deposits
|
— | 1,947 | — | — | 1,947 | |||||||||||||||
Securities sold under agreements to repurchase, at fair value
|
— | 127,966 | 394 | — | 128,360 | |||||||||||||||
Securities loaned
|
— | 6,194 | — | — | 6,194 | |||||||||||||||
Other secured financings
|
118 | 8,354 | 6,756 | — | 15,228 | |||||||||||||||
Unsecured
short-term
borrowings
|
— | 16,093 | 2,310 | — | 18,403 | |||||||||||||||
Unsecured
long-term
borrowings
|
— | 18,315 | 3,077 | — | 21,392 | |||||||||||||||
Other liabilities and accrued expenses
|
— | 141 | 1,913 | — | 2,054 | |||||||||||||||
Total financial liabilities at fair value
|
$ | 63,627 | $ | 255,008 | $ | 21,422 | (4) | $ | (17,460 | ) | $ | 322,597 | ||||||||
(1) | Includes $45 million of CDOs and CLOs backed by corporate obligations within level 3 of the fair value hierarchy. |
(2) | Substantially all consists of publicly listed equity securities. |
(3) | Includes $7.96 billion and $3.20 billion of credit derivative liabilities within level 2 and level 3, respectively, of the fair value hierarchy. These amounts exclude the effects of netting under enforceable netting agreements across other derivative product types. |
(4) | Level 3 liabilities were 6.6% of Total financial liabilities at fair value. |
(5) | Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level. |
Derivative Assets at Fair Value as of June 2010 | ||||||||||||||||||||
Cross-Level
|
||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Netting | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Interest rates
|
$ | 207 | $ | 569,264 | $ | 350 | $ | 569,821 | ||||||||||||
Credit
|
— | 138,829 | 14,120 | 152,949 | ||||||||||||||||
Currencies
|
— | 84,839 | 1,792 | 86,631 | ||||||||||||||||
Commodities
|
— | 34,907 | 1,893 | 36,800 | ||||||||||||||||
Equities
|
77 | 69,979 | 1,182 | 71,238 | ||||||||||||||||
Gross fair value of derivative assets
|
$ | 284 | $ | 897,818 | $ | 19,337 | $ | 917,439 | ||||||||||||
Counterparty
netting
(1)
|
— | (716,218 | ) | (5,381 | ) | $ | (2,275 | ) (3) | (723,874 | ) | ||||||||||
Subtotal
|
$ | 284 | $ | 181,600 | $ | 13,956 | $ | (2,275 | ) | $ | 193,565 | |||||||||
Cash collateral
netting
(2)
|
(113,764 | ) | ||||||||||||||||||
Fair value included in trading
assets, at fair value |
$ | 79,801 | ||||||||||||||||||
Derivative Liabilities at Fair Value as of June 2010 | ||||||||||||||||||||
Cross-Level
|
||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Netting | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Interest rates
|
$ | 9 | $ | 499,520 | $ | 370 | $ | 499,899 | ||||||||||||
Credit
|
— | 119,953 | 5,738 | 125,691 | ||||||||||||||||
Currencies
|
— | 75,663 | 658 | 76,321 | ||||||||||||||||
Commodities
|
— | 35,575 | 2,164 | 37,739 | ||||||||||||||||
Equities
|
73 | 56,840 | 2,535 | 59,448 | ||||||||||||||||
Gross fair value of derivative liabilities
|
$ | 82 | $ | 787,551 | $ | 11,465 | $ | 799,098 | ||||||||||||
Counterparty
netting
(1)
|
— | (716,218 | ) | (5,381 | ) | $ | (2,275 | ) (3) | (723,874 | ) | ||||||||||
Subtotal
|
$ | 82 | $ | 71,333 | $ | 6,084 | $ | (2,275 | ) | $ | 75,224 | |||||||||
Cash collateral
netting
(2)
|
(17,650 | ) | ||||||||||||||||||
Fair value included in trading
liabilities, at fair value |
$ | 57,574 | ||||||||||||||||||
(1) | Represents the netting of receivable balances with payable balances for the same counterparty pursuant to enforceable netting agreements. | |
(2) | Represents the netting of cash collateral received and posted on a counterparty basis pursuant to credit support agreements. | |
(3) | Represents the netting of receivable balances with payable balances for the same counterparty across levels of the fair value hierarchy pursuant to enforceable netting agreements. |
Level 3 Unrealized Gains/(Losses) | ||||||||||||||||
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Cash instruments — assets
|
$ | 191 | $ | (1,932 | ) | $ | 855 | $ | (5,597 | ) | ||||||
Cash instruments — liabilities
|
(109 | ) | 289 | (60 | ) | 280 | ||||||||||
Net unrealized gains/(losses) on level 3 cash instruments
|
82 | (1,643 | ) | 795 | (5,317 | ) | ||||||||||
Derivative contracts — net
|
1,386 | (1,403 | ) | 2,852 | (171 | ) | ||||||||||
Receivables from customers and counterparties
|
(21 | ) | — | (48 | ) | — | ||||||||||
Other secured financings
|
50 | (442 | ) | 39 | (426 | ) | ||||||||||
Unsecured
short-term
borrowings
|
224 | (189 | ) | 307 | (50 | ) | ||||||||||
Unsecured
long-term
borrowings
|
124 | (133 | ) | 137 | (98 | ) | ||||||||||
Other liabilities and accrued expenses
|
(17 | ) | 18 | 47 | 81 | |||||||||||
Total level 3 unrealized gains/(losses)
|
$ | 1,828 | $ | (3,792 | ) | $ | 4,129 | $ | (5,981 | ) | ||||||
• | A derivative contract with level 1 and/or level 2 inputs is classified as a level 3 financial instrument in its entirety if it has at least one significant level 3 input. | |
• | If there is one significant level 3 input, the entire gain or loss from adjusting only observable inputs (i.e., level 1 and level 2) is still classified as level 3. | |
• | Gains or losses that have been reported in level 3 resulting from changes in level 1 or level 2 inputs are frequently offset by gains or losses attributable to instruments classified within level 1 or level 2 or cash instruments reported within level 3 of the fair value hierarchy. |
Level 3 Financial Assets and Financial Liabilities at Fair Value | ||||||||||||||||||||||||
Net unrealized
|
||||||||||||||||||||||||
gains/(losses)
|
Net
|
|||||||||||||||||||||||
relating to
|
purchases,
|
|||||||||||||||||||||||
Balance,
|
instruments still
|
issuances
|
Net transfers
|
Balance,
|
||||||||||||||||||||
beginning
|
Net realized
|
held at the
|
and
|
in
and/or
out
|
end of
|
|||||||||||||||||||
of period | gains/(losses) | reporting date | settlements | of level 3 | period | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Three Months Ended June 2010
|
||||||||||||||||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||||||||||||||
Loans and securities backed by commercial real estate
|
$ | 4,070 | $ | 88 | $ | 60 | $ | (327 | ) | $ | (23 | ) (4) | $ | 3,868 | ||||||||||
Loans and securities backed by residential real estate
|
2,131 | 57 | 61 | 37 | (162 | ) (4) | 2,124 | |||||||||||||||||
Loan portfolios
|
1,291 | 4 | (16 | ) | (72 | ) | 51 | (4) | 1,258 | |||||||||||||||
Bank loans and bridge loans
|
9,323 | 134 | (205 | ) | (162 | ) | 483 | (5) | 9,573 | |||||||||||||||
Corporate debt securities
|
2,703 | 36 | 49 | (202 | ) | 6 | (4) | 2,592 | ||||||||||||||||
State and municipal obligations
|
870 | (5 | ) | 34 | (73 | ) | (1 | ) (4) | 825 | |||||||||||||||
Other debt obligations
|
1,487 | (1 | ) | 78 | (116 | ) | (72 | ) (4) | 1,376 | |||||||||||||||
Equities and convertible debentures
|
10,653 | 21 | 130 | 248 | (717 | ) (6) | 10,335 | |||||||||||||||||
Total cash instruments — assets
|
32,528 | 334 | (1) | 191 | (1) | (667 | ) | (435 | ) | 31,951 | ||||||||||||||
Cash instruments — liabilities
|
(483 | ) | 112 | (2) | (109 | ) (2) | (113 | ) | (2 | ) (4) | (595 | ) | ||||||||||||
Derivative contracts:
|
||||||||||||||||||||||||
Interest rates — net
|
94 | (6 | ) | 43 | (51 | ) | (195 | ) (4) | (115 | ) | ||||||||||||||
Credit — net
|
7,137 | (1 | ) | 949 | 83 | 358 | (4) | 8,526 | ||||||||||||||||
Currencies — net
|
468 | — | 75 | 287 | 270 | (4) | 1,100 | |||||||||||||||||
Commodities — net
|
(244 | ) | (92 | ) | (4 | ) | 92 | (23 | ) (4) | (271 | ) | |||||||||||||
Equities — net
|
(1,119 | ) | (5 | ) | 323 | (500 | ) | (67 | ) (4) | (1,368 | ) | |||||||||||||
Total derivative contracts — net
|
6,336 | (104 | ) (2) | 1,386 | (2)(3) | (89 | ) | 343 | 7,872 | |||||||||||||||
Securities purchased under agreements to resell
|
268 | — | — | — | (268 | ) (4) | — | |||||||||||||||||
Receivables from customers and counterparties
|
234 | 5 | (2) | (21 | ) (2) | — | — | (4) | 218 | |||||||||||||||
Securities sold under agreements to repurchase, at fair value
|
(1,055 | ) | — | — | (531 | ) | 167 | (4) | (1,419 | ) | ||||||||||||||
Other secured financings
|
(8,139 | ) | (12 | ) (2) | 50 | (2) | (38 | ) | 53 | (4) | (8,086 | ) | ||||||||||||
Unsecured
short-term
borrowings
|
(2,994 | ) | (47 | ) (2) | 224 | (2) | 224 | (175 | ) (4) | (2,768 | ) | |||||||||||||
Unsecured
long-term
borrowings
|
(1,715 | ) | (2 | ) (2) | 124 | (2) | 53 | (359 | ) (4) | (1,899 | ) | |||||||||||||
Other liabilities and accrued expenses
|
(2,327 | ) | (2 | ) (2) | (17 | ) (2) | (21 | ) | (19 | ) (4) | (2,386 | ) |
Level 3 Financial Assets and Financial Liabilities at Fair Value | ||||||||||||||||||||||||
Net unrealized
|
||||||||||||||||||||||||
gains/(losses)
|
Net
|
|||||||||||||||||||||||
relating to
|
purchases,
|
|||||||||||||||||||||||
Balance,
|
instruments still
|
issuances
|
Net transfers
|
Balance,
|
||||||||||||||||||||
beginning
|
Net realized
|
held at the
|
and
|
in
and/or
out
|
end of
|
|||||||||||||||||||
of year | gains/(losses) | reporting date | settlements | of level 3 | period | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Six Months Ended June 2010
|
||||||||||||||||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||||||||||||||
Loans and securities backed by commercial real estate
|
$ | 4,620 | $ | 172 | $ | 202 | $ | (1,002 | ) | $ | (124 | ) (4) | $ | 3,868 | ||||||||||
Loans and securities backed by residential real estate
|
1,880 | 66 | 143 | 52 | (17 | ) (4) | 2,124 | |||||||||||||||||
Loan portfolios
|
1,364 | 28 | (6 | ) | (194 | ) | 66 | (4) | 1,258 | |||||||||||||||
Bank loans and bridge loans
|
9,560 | 260 | 83 | (404 | ) | 74 | (4) | 9,573 | ||||||||||||||||
Corporate debt securities
|
2,235 | 72 | 141 | 793 | (649 | ) (7) | 2,592 | |||||||||||||||||
State and municipal obligations
|
1,114 | (3 | ) | 26 | (299 | ) | (13 | ) (4) | 825 | |||||||||||||||
Other debt obligations
|
2,235 | (10 | ) | 119 | (105 | ) | (863 | ) (8) | 1,376 | |||||||||||||||
Equities and convertible debentures
|
11,871 | 150 | 147 | (903 | ) | (930 | ) (6) | 10,335 | ||||||||||||||||
Total cash instruments — assets
|
34,879 | 735 | (1) | 855 | (1) | (2,062 | ) | (2,456 | ) | 31,951 | ||||||||||||||
Cash instruments — liabilities
|
(572 | ) | 132 | (2) | (60 | ) (2) | (169 | ) | 74 | (4) | (595 | ) | ||||||||||||
Derivative contracts:
|
||||||||||||||||||||||||
Interest rates — net
|
(71 | ) | (14 | ) | 7 | 21 | (58 | ) (4) | (115 | ) | ||||||||||||||
Credit — net
|
6,366 | (39 | ) | 2,238 | (19 | ) | (20 | ) (4) | 8,526 | |||||||||||||||
Currencies — net
|
215 | (37 | ) | 64 | 331 | 527 | (9) | 1,100 | ||||||||||||||||
Commodities — net
|
(90 | ) | (259 | ) | 105 | 259 | (286 | ) (4) | (271 | ) | ||||||||||||||
Equities — net
|
(1,224 | ) | (52 | ) | 438 | (439 | ) | (91 | ) (4) | (1,368 | ) | |||||||||||||
Total derivative contracts — net
|
5,196 | (401 | ) (2) | 2,852 | (2)(3) | 153 | 72 | 7,872 | ||||||||||||||||
Receivables from customers and counterparties
|
— | 10 | (2) | (48 | ) (2) | — | 256 | (4) | 218 | |||||||||||||||
Securities sold under agreements to repurchase, at fair value
|
(394 | ) | — | — | (1,025 | ) | — | (4) | (1,419 | ) | ||||||||||||||
Other secured financings
|
(6,756 | ) | (21 | ) (2) | 39 | (2) | (1,174 | ) | (174 | ) (10) | (8,086 | ) | ||||||||||||
Unsecured
short-term
borrowings
|
(2,310 | ) | (67 | ) (2) | 307 | (2) | 267 | (965 | ) (10) | (2,768 | ) | |||||||||||||
Unsecured
long-term
borrowings
|
(3,077 | ) | (15 | ) (2) | 137 | (2) | 19 | 1,037 | (11) | (1,899 | ) | |||||||||||||
Other liabilities and accrued expenses
|
(1,913 | ) | (5 | ) (2) | 47 | (2) | (22 | ) | (493 | ) (12) | (2,386 | ) |
(1) | The aggregate amounts include approximately $173 million and $352 million reported in “Trading and principal investments” and “Interest income,” respectively, in the condensed consolidated statement of earnings for the three months ended June 2010. The aggregate amounts include approximately $932 million and $658 million reported in “Trading and principal investments” and “Interest income,” respectively, in the condensed consolidated statement of earnings for the six months ended June 2010. | |
(2) | Substantially all is reported in “Trading and principal investments” in the condensed consolidated statements of earnings. | |
(3) | Principally resulted from changes in level 2 inputs. | |
(4) | Includes no individually significant transfers into or out of level 3 during the three and six months ended June 2010. | |
(5) | Principally reflects transfers from level 2 within the fair value hierarchy reflecting reduced transparency of prices for these financial instruments as a result of less trading activity. | |
(6) | Principally reflects transfers to level 2 within the fair value hierarchy of certain private equity investments, reflecting improved transparency of prices for these financial instruments, primarily as a result of market transactions. | |
(7) | Principally reflects a reduction in financial instruments as a result of the consolidation of a VIE, which holds identifiable intangible assets, as a result of the adoption of ASU No. 2009-17. Such assets are included in “Other assets” in the condensed consolidated statements of financial condition. | |
(8) | Principally reflects a reduction in financial instruments as a result of the consolidation of a VIE, which holds real estate assets. Such assets are included in “Other assets” in the condensed consolidated statements of financial condition. | |
(9) | Principally reflects transfers from level 2 within the fair value hierarchy of certain currency derivative assets reflecting reduced transparency of the correlation inputs used to value these financial instruments. |
(10) | Principally reflects consolidation of certain VIEs as a result of the adoption of ASU No. 2009-17. |
(11) | Upon the firm’s consolidation of certain VIEs as a result of the adoption of ASU No. 2009-17, the firm’s borrowings from such VIEs, substantially all of which were level 3, became intercompany borrowings and were eliminated in consolidation. |
(12) | Principally reflects an increase related to subordinated liabilities issued by VIEs which were consolidated upon the adoption of ASU No. 2009-17. |
Level 3 Financial Assets and Financial Liabilities at Fair Value | ||||||||||||||||||||||||
Net unrealized
|
||||||||||||||||||||||||
gains/(losses)
|
Net
|
|||||||||||||||||||||||
relating to
|
purchases,
|
|||||||||||||||||||||||
Balance,
|
instruments still
|
issuances
|
Net transfers
|
Balance,
|
||||||||||||||||||||
beginning
|
Net realized
|
held at the
|
and
|
in
and/or
out
|
end of
|
|||||||||||||||||||
of period | gains/(losses) | reporting date | settlements | of level 3 | period | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Three Months Ended June 2009
|
||||||||||||||||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||||||||||||||
Loans and securities backed by commercial real estate
|
$ | 7,705 | $ | (207 | ) | $ | (637 | ) | $ | (92 | ) | $ | 70 | $ | 6,839 | |||||||||
Loans and securities backed by residential real estate
|
2,088 | 101 | (14 | ) | (301 | ) | (12 | ) | 1,862 | |||||||||||||||
Loan portfolios
|
1,851 | 41 | (29 | ) | (89 | ) | — | 1,774 | ||||||||||||||||
Bank loans and bridge loans
|
9,866 | 169 | (74 | ) | (679 | ) | 387 | 9,669 | ||||||||||||||||
Corporate debt securities
|
2,648 | 23 | (70 | ) | (161 | ) | (68 | ) | 2,372 | |||||||||||||||
State and municipal obligations
|
1,157 | 3 | (5 | ) | (33 | ) | 308 | 1,430 | ||||||||||||||||
Other debt obligations
|
3,749 | 119 | (166 | ) | (626 | ) | (273 | ) | 2,803 | |||||||||||||||
Equities and convertible debentures
|
13,620 | 11 | (937 | ) | 118 | (133 | ) | 12,679 | ||||||||||||||||
Total cash instruments — assets
|
42,684 | 260 | (1) | (1,932 | ) (1) | (1,863 | ) | 279 | 39,428 | |||||||||||||||
Cash instruments — liabilities
|
(1,304 | ) | (9 | ) (2) | 289 | (2) | (31 | ) | 35 | (1,020 | ) | |||||||||||||
Derivative contracts — net
|
4,116 | 474 | (2) | (1,403 | ) (2)(3) | (141 | ) | 30 | (4) | 3,076 | ||||||||||||||
Other secured financings
|
(7,277 | ) | (15 | ) (2) | (442 | ) (2) | 90 | (423 | ) (5) | (8,067 | ) | |||||||||||||
Unsecured
short-term
borrowings
|
(3,143 | ) | 1 | (2) | (189 | ) (2) | (219 | ) | 1,321 | (6) | (2,229 | ) | ||||||||||||
Unsecured
long-term
borrowings
|
(1,916 | ) | (25 | ) (2) | (133 | ) (2) | 54 | (1,407 | ) (6) | (3,427 | ) | |||||||||||||
Other liabilities and accrued expenses
|
(1,510 | ) | (11 | ) (2) | 18 | (2) | (141 | ) | — | (1,644 | ) |
Level 3 Financial Assets and Financial Liabilities at Fair Value | ||||||||||||||||||||||||
Net unrealized
|
||||||||||||||||||||||||
gains/(losses)
|
Net
|
|||||||||||||||||||||||
relating to
|
purchases,
|
|||||||||||||||||||||||
Balance,
|
instruments still
|
issuances
|
Net transfers
|
Balance,
|
||||||||||||||||||||
beginning
|
Net realized
|
held at the
|
and
|
in
and/or
out
|
end of
|
|||||||||||||||||||
of period | gains/(losses) | reporting date | settlements | of level 3 | period | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Six Months Ended June 2009
|
||||||||||||||||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||||||||||||||
Loans and securities backed by commercial real estate
|
$ | 9,170 | $ | (148 | ) | $ | (1,546 | ) | $ | (530 | ) | $ | (107 | ) | $ | 6,839 | ||||||||
Loans and securities backed by residential real estate
|
1,927 | 183 | (123 | ) | (505 | ) | 380 | 1,862 | ||||||||||||||||
Loan portfolios
|
4,266 | 90 | (269 | ) | (766 | ) | (1,547 | ) (7) | 1,774 | |||||||||||||||
Bank loans and bridge loans
|
11,169 | 344 | (682 | ) | (1,227 | ) | 65 | 9,669 | ||||||||||||||||
Corporate debt securities
|
2,734 | 163 | (349 | ) | 13 | (189 | ) | 2,372 | ||||||||||||||||
State and municipal obligations
|
1,356 | 7 | (9 | ) | (219 | ) | 295 | 1,430 | ||||||||||||||||
Other debt obligations
|
3,903 | 68 | (211 | ) | (920 | ) | (37 | ) | 2,803 | |||||||||||||||
Equities and convertible debentures
|
15,127 | 7 | (2,408 | ) | (56 | ) | 9 | 12,679 | ||||||||||||||||
Total cash instruments — assets
|
49,652 | 714 | (1) | (5,597 | ) (1) | (4,210 | ) | (1,131 | ) | 39,428 | ||||||||||||||
Cash instruments — liabilities
|
(1,727 | ) | (2 | ) (2) | 280 | (2) | 274 | 155 | (1,020 | ) | ||||||||||||||
Derivative contracts — net
|
3,315 | 577 | (2) | (171 | ) (2)(3) | (1,446 | ) | 801 | (8) | 3,076 | ||||||||||||||
Other secured financings
|
(4,039 | ) | (21 | ) (2) | (426 | ) (2) | (1,053 | ) | (2,528 | ) (9) | (8,067 | ) | ||||||||||||
Unsecured
short-term
borrowings
|
(4,712 | ) | 8 | (2) | (50 | ) (2) | (1,039 | ) | 3,564 | (9) | (2,229 | ) | ||||||||||||
Unsecured
long-term
borrowings
|
(1,689 | ) | 15 | (2) | (98 | ) (2) | 225 | (1,880 | ) (9) | (3,427 | ) | |||||||||||||
Other liabilities and accrued expenses
|
— | (21 | ) (2) | 81 | (2) | (751 | ) | (953 | ) (10) | (1,644 | ) |
(1) | The aggregate amounts include approximately $(2.18) billion and $510 million reported in “Trading and principal investments” and “Interest income,” respectively, in the condensed consolidated statement of earnings for the three months ended June 2009. The aggregate amounts include approximately $(5.96) billion and $1.08 billion reported in “Trading and principal investments” and “Interest income,” respectively, in the condensed consolidated statement of earnings for the six months ended June 2009. | |
(2) | Substantially all is reported in “Trading and principal investments” in the condensed consolidated statements of earnings. | |
(3) | Primarily resulted from changes in level 2 inputs. | |
(4) | Principally reflects transfers from level 2 within the fair value hierarchy of credit derivative assets, reflecting reduced transparency of the correlation inputs used to value these financial instruments, offset by transfers to level 2 within the fair value hierarchy of equity derivative assets, reflecting improved transparency of the equity index volatility inputs used to value these financial instruments. | |
(5) | Principally reflects transfers from level 2 within the fair value hierarchy due to reduced transparency of prices for municipal obligations that collateralize certain secured financings. | |
(6) | Principally reflects transfers from level 3 unsecured short-term borrowings to level 3 unsecured long-term borrowings related to changes in the terms of certain notes. | |
(7) | Principally reflects the deconsolidation of certain loan portfolios for which the firm did not bear economic exposure. | |
(8) | Principally reflects transfers from level 2 within the fair value hierarchy of credit derivative assets, reflecting reduced transparency of certain credit spread inputs used to value these financial instruments, partially offset by transfers to level 2 within the fair value hierarchy of equity derivative assets, reflecting improved transparency of the equity index volatility inputs used to value these financial instruments. | |
(9) | Principally reflects transfers from level 3 unsecured short-term borrowings to level 3 other secured financings and level 3 unsecured long-term borrowings related to changes in the terms of certain notes. |
(10) | Principally reflects transfers from level 2 within the fair value hierarchy of certain insurance contracts, reflecting reduced transparency of mortality curve inputs used to value these financial instruments as a result of less observable trading activity. |
As of June 2010 | As of December 2009 | |||||||||||||||||||||||
Number
|
Number
|
|||||||||||||||||||||||
Derivative
|
Derivative
|
of
|
Derivative
|
Derivative
|
of
|
|||||||||||||||||||
Assets | Liabilities | Contracts | Assets | Liabilities | Contracts | |||||||||||||||||||
(in millions, except number of contracts) | ||||||||||||||||||||||||
Derivative contracts for trading activities | ||||||||||||||||||||||||
Interest rates
|
$ | 543,982 | $ | 499,894 | 281,630 | $ | 458,614 | $ | 407,125 | 270,707 | ||||||||||||||
Credit
|
152,949 | 125,691 | 401,265 | 164,669 | 134,810 | 443,450 | ||||||||||||||||||
Currencies
|
86,563 | 76,300 | 244,554 | 77,223 | 62,413 | 171,760 | ||||||||||||||||||
Commodities
|
36,800 | 37,739 | 69,553 | 47,234 | 48,163 | 73,010 | ||||||||||||||||||
Equities
|
71,238 | 59,448 | 289,887 | 67,559 | 53,207 | 237,625 | ||||||||||||||||||
Subtotal
|
$ | 891,532 | $ | 799,072 | 1,286,889 | $ | 815,299 | $ | 705,718 | 1,196,552 | ||||||||||||||
Derivative contracts accounted for as hedges | ||||||||||||||||||||||||
Interest rates
|
$ | 25,839 | $ | 5 | 868 | $ | 19,563 | $ | 1 | 806 | ||||||||||||||
Currencies
|
68 | 21 | 71 | 8 | 47 | 58 | ||||||||||||||||||
Subtotal
|
$ | 25,907 | $ | 26 | 939 | $ | 19,571 | $ | 48 | 864 | ||||||||||||||
Gross fair value of derivative contracts
|
$ | 917,439 | $ | 799,098 | 1,287,828 | $ | 834,870 | $ | 705,766 | 1,197,416 | ||||||||||||||
Counterparty
netting
(1)
|
(723,874 | ) | (723,874 | ) | (635,014 | ) | (635,014 | ) | ||||||||||||||||
Cash collateral
netting
(2)
|
(113,764 | ) | (17,650 | ) | (124,603 | ) | (14,743 | ) | ||||||||||||||||
Fair value included in trading assets,
at fair value |
$ | 79,801 | $ | 75,253 | ||||||||||||||||||||
Fair value included in trading liabilities,
at fair value |
$ | 57,574 | $ | 56,009 | ||||||||||||||||||||
(1) | Represents the netting of receivable balances with payable balances for the same counterparty pursuant to enforceable netting agreements. |
(2) | Represents the netting of cash collateral received and posted on a counterparty basis pursuant to credit support agreements. |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Interest rates
|
$ | (2,814 | ) | $ | 4,215 | $ | (4,728 | ) | $ | 4,875 | ||||||
Credit
|
2,376 | 1,558 | 6,479 | 3,114 | ||||||||||||
Currencies
(1)
|
3,470 | (1,398 | ) | 6,791 | (421 | ) | ||||||||||
Equities
|
376 | 1,798 | 1,949 | 2,842 | ||||||||||||
Commodities and other
|
343 | 1,574 | 1,161 | 3,343 | ||||||||||||
Total
|
$ | 3,751 | $ | 7,747 | $ | 11,652 | $ | 13,753 | ||||||||
(1) | Includes gains/(losses) on currency contracts used to economically hedge positions included in other product types in this table. |
• | Credit default swaps. Single-name credit default swaps protect the buyer against the loss of principal on one or more bonds, loans or mortgages (reference obligations) in the event of a default by the issuer (reference entity). The buyer of protection pays an initial or periodic premium to the seller and receives credit default protection for the period of the contract. If there is no credit default event, as defined by the specific derivative contract, then the seller of protection makes no payments to the buyer of protection. However, if a credit default event occurs, the seller of protection will be required to make a payment to the buyer of protection. Typical credit default events requiring payment include bankruptcy of the reference credit entity, failure to pay the principal or interest, and restructuring of the relevant obligations of the reference entity. | |
• | Credit indices, baskets and tranches. Credit derivatives may reference a basket of single-name credit default swaps or a broad-based index. Typically, in the event of a default of one of the underlying reference obligations, the protection seller will pay to the protection buyer a pro-rata portion of a transaction’s total notional amount relating to the underlying defaulted reference obligation. In tranched transactions, the credit risk of a basket or index is separated into various portions each having different levels of subordination. The most junior tranches cover initial defaults, and once losses exceed the notional amount of these tranches, the excess is covered by the next most senior tranche in the capital structure. | |
• | Total return swaps. A total return swap transfers the risks relating to economic performance of a reference obligation from the protection buyer to the protection seller. Typically, the protection buyer receives from the protection seller a floating rate of interest and protection against any reduction in fair value of the reference obligation, and in return the protection seller receives the cash flows associated with the reference obligation, plus any increase in the fair value of the reference obligation. | |
• | Credit options. In a credit option, the option writer assumes the obligation to purchase or sell a reference obligation at a specified price or credit spread. The option purchaser buys the right to sell the reference obligation to, or purchase it from, the option writer. The payments on credit options depend either on a particular credit spread or the price of the reference obligation. |
Maximum Payout/Notional
|
||||||||||||||||||||||||||||||||||||
Maximum Payout/Notional Amount
|
Amount of Purchased
|
Fair Value of
|
||||||||||||||||||||||||||||||||||
of Written Credit Derivatives by Tenor (1) | Credit Derivatives | Written Credit Derivatives | ||||||||||||||||||||||||||||||||||
Offsetting
|
Other
|
|||||||||||||||||||||||||||||||||||
5 Years
|
Purchased
|
Purchased
|
Net
|
|||||||||||||||||||||||||||||||||
0 - 12
|
1 - 5
|
or
|
Credit
|
Credit
|
Asset/
|
|||||||||||||||||||||||||||||||
Months | Years | Greater | Total | Derivatives (2) | Derivatives (3) | Asset | Liability | (Liability) | ||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||||||
As of June 2010
|
||||||||||||||||||||||||||||||||||||
Credit spread on
underlying (basis points) (4) |
||||||||||||||||||||||||||||||||||||
0-250
|
$ | 220,472 | $ | 1,011,103 | $ | 283,685 | $ | 1,515,260 | $ | 1,423,331 | $ | 216,075 | $ | 20,272 | $ | 19,324 | $ | 948 | ||||||||||||||||||
251-500
|
22,176 | 214,903 | 54,160 | 291,239 | 272,856 | 39,163 | 5,016 | 12,209 | (7,193 | ) | ||||||||||||||||||||||||||
501-1,000
|
15,064 | 137,022 | 44,841 | 196,927 | 163,787 | 23,345 | 4,086 | 15,599 | (11,513 | ) | ||||||||||||||||||||||||||
Greater than 1,000
|
9,887 | 112,152 | 23,356 | 145,395 | 115,449 | 35,542 | 2,164 | 52,420 | (50,256 | ) | ||||||||||||||||||||||||||
Total
|
$ | 267,599 | $ | 1,475,180 | $ | 406,042 | $ | 2,148,821 | $ | 1,975,423 | $ | 314,125 | $ | 31,538 | $ | 99,552 | $ | (68,014 | ) (5) | |||||||||||||||||
As of December 2009 | ||||||||||||||||||||||||||||||||||||
Credit spread on
underlying (basis points) (4) |
||||||||||||||||||||||||||||||||||||
0-250
|
$ | 283,353 | $ | 1,342,649 | $ | 414,809 | $ | 2,040,811 | $ | 1,884,864 | $ | 299,329 | $ | 39,740 | $ | 13,441 | $ | 26,299 | ||||||||||||||||||
251-500
|
15,151 | 142,732 | 39,337 | 197,220 | 182,583 | 27,194 | 5,008 | 6,816 | (1,808 | ) | ||||||||||||||||||||||||||
501-1,000
|
10,364 | 101,621 | 34,194 | 146,179 | 141,317 | 5,673 | 2,841 | 12,448 | (9,607 | ) | ||||||||||||||||||||||||||
Greater than 1,000
|
20,262 | 107,768 | 31,208 | 159,238 | 117,914 | 48,699 | 1,524 | 60,279 | (58,755 | ) | ||||||||||||||||||||||||||
Total
|
$ | 329,130 | $ | 1,694,770 | $ | 519,548 | $ | 2,543,448 | $ | 2,326,678 | $ | 380,895 | $ | 49,113 | $ | 92,984 | $ | (43,871 | ) (5) | |||||||||||||||||
(1) | Tenor is based on expected duration for mortgage-related credit derivatives and on remaining contractual maturity for other credit derivatives. |
(2) | Offsetting purchased credit derivatives represent the notional amount of purchased credit derivatives to the extent they economically hedge written credit derivatives with identical underlyings. |
(3) | Comprised of purchased protection in excess of the amount of written protection on identical underlyings and purchased protection on other underlyings on which the firm has not written protection. |
(4) | Credit spread on the underlying, together with the tenor of the contract, are indicators of payment/performance risk. For example, the firm is least likely to pay or otherwise be required to perform where the credit spread on the underlying is “0-250” basis points and the tenor is “0-12 Months.” The likelihood of payment or performance is generally greater as the credit spread on the underlying and tenor increase. |
(5) | These net liabilities differ from the carrying values related to credit derivatives in the firm’s condensed consolidated statements of financial condition because they exclude the effects of both netting under enforceable netting agreements and netting of cash collateral posted or received pursuant to credit support agreements. |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Net gains/(losses) including hedges
|
$ | 390 | $ | (348 | ) | $ | 497 | $ | (545 | ) | ||||||
Net gains/(losses) excluding hedges
|
405 | (353 | ) | 514 | (545 | ) |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Unsecured
long-term
borrowings
(1)
|
$ | 286 | $ | (307 | ) | $ | 370 | $ | (442 | ) | ||||||
Other secured
financings
(2)
|
58 | (442 | ) | 54 | (417 | ) | ||||||||||
Unsecured
short-term
borrowings
(3)
|
61 | (27 | ) | 74 | (94 | ) | ||||||||||
Receivables from customers and
counterparties
(4)
|
(55 | ) | 84 | (93 | ) | 82 | ||||||||||
Other liabilities and accrued
expenses
(5)(6)
|
(142 | ) | (162 | ) | (73 | ) | (80 | ) | ||||||||
Other
(7)
|
20 | 34 | 17 | 8 | ||||||||||||
Total
(8)
|
$ | 228 | $ | (820 | ) | $ | 349 | $ | (943 | ) | ||||||
(1) | Excludes losses of $2.17 billion and $2.96 billion for the three months ended June 2010 and June 2009, respectively, and $1.59 billion and $1.72 billion for the six months ended June 2010 and June 2009, respectively, related to the embedded derivative component of hybrid financial instruments. Such losses would have been recognized even if the firm had not elected to account for the entire hybrid instrument at fair value under the fair value option. | |
(2) | Excludes gains/(losses) of $(12) million for the three months ended June 2009 and $(5) million and $7 million for the six months ended June 2010 and June 2009, respectively, related to financings recorded as a result of transactions that were accounted for as secured financings rather than sales. Changes in the fair value of these secured financings are offset by changes in the fair value of the related financial instruments included in “Trading assets, at fair value” in the condensed consolidated statements of financial condition. Such gains/(losses) were not material for the three months ended June 2010. | |
(3) | Excludes gains/(losses) of $964 million and $(1.18) billion for the three months ended June 2010 and June 2009, respectively, and $759 million and $(1.48) billion for the six months ended June 2010 and June 2009, respectively, related to the embedded derivative component of hybrid financial instruments. Such gains and losses would have been recognized even if the firm had not elected to account for the entire hybrid instrument at fair value under the fair value option. | |
(4) | Primarily consists of gains/(losses) on certain reinsurance contracts. | |
(5) | Excludes gains of $44 million and $151 million for the three and six months ended June 2010, respectively, related to subordinated liabilities issued by consolidated VIEs. Changes in the fair value of these financial instruments are offset by changes in the fair value of the financial assets held by the consolidated VIEs. | |
(6) | Primarily consists of losses on certain insurance and reinsurance contracts. | |
(7) | Primarily consists of gains/(losses) on resale and repurchase agreements, securities borrowed and loaned within Trading and Principal Investments, and deposits. | |
(8) | Reported in “Trading and principal investments” in the condensed consolidated statements of earnings. The amounts exclude contractual interest, which is included in “Interest income” and “Interest expense” in the condensed consolidated statements of earnings, for all instruments other than hybrid financial instruments. |
As of June 2010 | As of December 2009 | |||||||||||||||
Fair Value of
|
Unfunded
|
Fair Value of
|
Unfunded
|
|||||||||||||
Investments | Commitments | Investments | Commitments | |||||||||||||
(in millions) | ||||||||||||||||
Private equity
funds
(1)
|
$ | 7,317 | $ | 6,057 | $ | 8,229 | $ | 5,722 | ||||||||
Private debt
funds
(2)
|
4,180 | 3,580 | 3,628 | 4,048 | ||||||||||||
Hedge
funds
(3)
|
3,015 | — | 3,133 | — | ||||||||||||
Real estate and other
funds
(4)
|
910 | 2,369 | 939 | 2,398 | ||||||||||||
Total
|
$ | 15,422 | $ | 12,006 | $ | 15,929 | $ | 12,168 | ||||||||
(1) | These funds primarily invest in a broad range of industries worldwide in a variety of situations, including leveraged buyouts, recapitalizations, and growth investments. | |
(2) | These funds generally invest in fixed income instruments and are focused on providing private high-yield capital for mid to large-sized leveraged and management buyout transactions, recapitalizations, financings, refinancings, acquisitions and restructurings for private equity firms, private family companies and corporate issuers. | |
(3) | These funds are primarily multi-disciplinary hedge funds that employ a fundamental bottom-up investment approach across various asset classes and strategies including long/short equity, credit, convertibles, risk arbitrage/special situations and capital structure arbitrage. | |
(4) | These funds invest globally, primarily in real estate companies, loan portfolios, debt recapitalizations and direct property. |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Other secured financings
(short-term)
(1)(2)
|
$ | 13,432 | $ | 12,931 | ||||
Other secured financings
(long-term):
|
||||||||
2011
|
1,609 | 3,832 | ||||||
2012
|
4,816 | 1,726 | ||||||
2013
|
1,266 | 1,518 | ||||||
2014
|
2,055 | 1,617 | ||||||
2015
|
246 | 255 | ||||||
2016-thereafter
|
2,410 | 2,255 | ||||||
Total other secured financings
(long-term)
(3)(4)(5)
|
12,402 | 11,203 | ||||||
Total other secured
financings
(6)(7)
|
$ | 25,834 | $ | 24,134 | ||||
(1) | As of June 2010 and December 2009, consists of U.S. dollar-denominated financings of $4.40 billion and $6.47 billion (including $4.19 billion and $6.15 billion at fair value) and non-U.S. dollar-denominated financings of $9.03 billion and $6.46 billion (including $1.60 billion and $1.08 billion at fair value), respectively. As of June 2010 and December 2009, after giving effect to hedging activities, the U.S. dollar-denominated financings not at fair value had a weighted average interest rate of 4.18% and 3.44%, respectively, and the non-U.S. dollar-denominated financings not at fair value had a weighted average interest rate of 0.71% and 1.57%, respectively. | |
(2) | Includes other secured financings maturing within one year of the financial statement date and other secured financings that are redeemable within one year of the financial statement date at the option of the holder. | |
(3) | As of June 2010 and December 2009, consists of U.S. dollar-denominated financings of $8.77 billion and $7.28 billion (including $7.37 billion and $5.90 billion at fair value) and non-U.S. dollar-denominated financings of $3.63 billion and $3.92 billion (including $2.72 billion and $2.10 billion at fair value), respectively. As of June 2010 and December 2009, after giving effect to hedging activities, the U.S. dollar-denominated financings not at fair value had a weighted average interest rate of 1.85% and 1.83%, respectively, and the non-U.S. dollar-denominated financings not at fair value had a weighted average interest rate of 2.77% and 2.30%, respectively. | |
(4) | Secured long-term financings that are repayable prior to maturity at the option of the firm are reflected at their contractual maturity dates. Secured long-term financings that are redeemable prior to maturity at the option of the holder are reflected at the dates such options become exercisable. | |
(5) | The aggregate contractual principal amount of other secured financings (long-term) for which the fair value option was elected, primarily consisting of transfers of financial assets accounted for as financings rather than sales, debt raised through the William Street credit extension program and certain other nonrecourse financings, exceeded the related fair value by $725 million as of June 2010. | |
(6) | As of June 2010 and December 2009, $21.81 billion and $18.25 billion, respectively, of these financings were collateralized by trading assets and $4.02 billion and $5.88 billion, respectively, by other assets (primarily real estate and cash). Other secured financings include $9.77 billion and $10.63 billion of nonrecourse obligations as of June 2010 and December 2009, respectively. | |
(7) | As of June 2010 and December 2009, other secured financings include $10.61 billion and $9.51 billion, respectively, related to transfers of financial assets accounted for as financings rather than sales. Such financings were collateralized by financial assets included in “Trading assets, at fair value” in the condensed consolidated statements of financial condition of $10.87 billion and $9.78 billion as of June 2010 and December 2009, respectively. |
Note 4. | Securitization Activities and Variable Interest Entities |
As of June 2010 | As of December 2009 | |||||||||||||||||||||||
Outstanding
|
Fair Value of
|
Fair Value of
|
Outstanding
|
Fair Value of
|
Fair Value of
|
|||||||||||||||||||
Principal
|
Retained
|
Purchased
|
Principal
|
Retained
|
Purchased
|
|||||||||||||||||||
Amount | Interests | Interests (1) | Amount | Interests | Interests (1) | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Residential
mortgage-backed
(2)
|
$ | 60,564 | $ | 3,755 | $ | 8 | $ | 59,410 | $ | 3,956 | $ | 17 | ||||||||||||
Commercial
mortgage-backed
|
6,685 | 56 | 86 | 11,643 | 56 | 96 | ||||||||||||||||||
Other
(3)
|
16,503 | 110 | 140 | 17,768 | 93 | 54 | ||||||||||||||||||
Total
(4)
|
$ | 83,752 | $ | 3,921 | $ | 234 | $ | 88,821 | $ | 4,105 | $ | 167 | ||||||||||||
(1) | Comprised of senior and subordinated interests in securitization-related entities purchased in connection with secondary market-making activities in which the firm also holds retained interests. In addition to these interests, the firm had other continuing involvement in the form of derivative transactions and guarantees with certain nonconsolidated VIEs for which the carrying value was a net liability of $95 million and $87 million as of June 2010 and December 2009, respectively. The notional amounts of these transactions are included in maximum exposure to loss in the nonconsolidated VIE table below. | |
(2) | Primarily consists of outstanding principal and retained interests related to government agency securitization entities. | |
(3) | Primarily consists of CDOs backed by corporate and mortgage obligations and CLOs. | |
(4) | Includes $8.08 billion of outstanding principal amount and $24 million of fair value of retained interests as of June 2010 related to securitization entities in which the firm’s only continuing involvement is retained servicing, which is market-based and therefore not a variable interest. |
As of June 2010 | As of December 2009 | |||||||||||||||
Type of Retained Interests | Type of Retained Interests | |||||||||||||||
Mortgage-
|
Mortgage-
|
|||||||||||||||
Backed | Other (1) | Backed | Other (1) | |||||||||||||
($ in millions) | ||||||||||||||||
Fair value of retained interests
|
$ | 3,811 | $ | 110 | $ | 4,012 | $ | 93 | ||||||||
Weighted average life (years)
|
5.0 | 2.3 | 4.4 | 4.4 | ||||||||||||
Constant prepayment
rate
(2)
|
21.9 | % | N.M. | 23.5 | % | N.M. | ||||||||||
Impact of 10% adverse
change
(2)
|
$ | (47 | ) | N.M. | $ | (44 | ) | N.M. | ||||||||
Impact of 20% adverse
change
(2)
|
(96 | ) | N.M. | (92 | ) | N.M. | ||||||||||
Discount
rate
(3)
|
7.8 | % | N.M. | 8.4 | % | N.M. | ||||||||||
Impact of 10% adverse change
|
$ | (70 | ) | N.M. | $ | (76 | ) | N.M. | ||||||||
Impact of 20% adverse change
|
(137 | ) | N.M. | (147 | ) | N.M. |
(1) | Due to the nature and current fair value of certain of these retained interests, the weighted average assumptions for constant prepayment and discount rates and the related sensitivity to adverse changes are not meaningful as of June 2010 and December 2009. The firm’s maximum exposure to adverse changes in the value of these interests is the firm’s carrying value of $110 million and $93 million as of June 2010 and December 2009, respectively. | |
(2) | Constant prepayment rate is included only for positions for which constant prepayment rate is a key assumption in the determination of fair value. | |
(3) | The majority of the firm’s mortgage-backed retained interests are U.S. government agency-issued collateralized mortgage obligations, for which there is no anticipated credit loss. For the remainder of the firm’s retained interests, the expected credit loss assumptions are reflected within the discount rate. |
As of June 2010 | ||||||||||||||||||||||||||||
Real estate,
|
||||||||||||||||||||||||||||
Corporate
|
credit-related
|
Other
|
||||||||||||||||||||||||||
Mortgage-
|
CDOs and
|
and other
|
asset-
|
Power-
|
Investment
|
|||||||||||||||||||||||
backed (1) | CLOs (1) | investing (2) | backed (1) | related (3) | funds (4) | Total | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Assets in VIE
|
$ | 73,779 | (6) | $ | 21,807 | $ | 13,865 | $ | 2,188 | $ | 553 | $ | 1,965 | $ | 114,157 | |||||||||||||
Carrying Value of the Firm’s Variable Interests | ||||||||||||||||||||||||||||
Assets
|
$ | 4,481 | $ | 1,052 | $ | 1,210 | $ | 109 | $ | 235 | $ | 7 | $ | 7,094 | ||||||||||||||
Liabilities
|
4 | 147 | 163 | 4 | 1 | — | 319 | |||||||||||||||||||||
Maximum Exposure to Loss in Nonconsolidated VIEs (5) | ||||||||||||||||||||||||||||
Retained interests
|
$ | 3,786 | $ | 96 | $ | — | $ | 14 | $ | — | $ | — | $ | 3,896 | ||||||||||||||
Purchased interests
|
511 | 191 | — | 87 | — | — | 789 | |||||||||||||||||||||
Commitments and guarantees
|
— | 1 | 301 | — | 37 | — | 339 | (9) | ||||||||||||||||||||
Derivatives
|
3,829 | (6)(7) | 6,884 | (8) | — | 1,145 | — | — | 11,858 | (9) | ||||||||||||||||||
Loans and investments
|
127 | — | 1,210 | — | 235 | 7 | 1,579 | |||||||||||||||||||||
Total
|
$ | 8,253 | $ | 7,172 | $ | 1,511 | $ | 1,246 | $ | 272 | $ | 7 | $ | 18,461 | ||||||||||||||
As of December 2009 | ||||||||||||||||||||||||||||
Real estate,
|
||||||||||||||||||||||||||||
Corporate
|
credit-related
|
Other
|
Principal-
|
|||||||||||||||||||||||||
Mortgage
|
CDOs and
|
and other
|
asset-
|
Power-
|
protected
|
|||||||||||||||||||||||
CDOs (1) | CLOs (1) | investing (2) | backed (1) | related (3) | notes (10) | Total | ||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||
Assets in VIE
|
$ | 9,114 | $ | 32,490 | $ | 22,618 | $ | 497 | $ | 592 | $ | 2,209 | $ | 67,520 | ||||||||||||||
Carrying Value of the Firm’s Variable Interests | ||||||||||||||||||||||||||||
Assets
|
$ | 182 | $ | 834 | $ | 2,386 | $ | 16 | $ | 224 | $ | 12 | $ | 3,654 | ||||||||||||||
Liabilities
|
10 | 400 | 204 | 12 | 3 | 1,357 | 1,986 | |||||||||||||||||||||
Maximum Exposure to Loss in Nonconsolidated VIEs (5) | ||||||||||||||||||||||||||||
Retained and purchased interests
|
135 | 259 | — | — | — | — | 394 | |||||||||||||||||||||
Commitments and guarantees
|
— | 3 | 397 | — | 37 | — | 437 | (9) | ||||||||||||||||||||
Derivatives
|
4,111 | (7) | 7,577 | (8) | — | 497 | — | 2,512 | 14,697 | (9) | ||||||||||||||||||
Loans and investments
|
— | — | 2,425 | — | 224 | — | 2,649 | |||||||||||||||||||||
Total
|
$ | 4,246 | $ | 7,839 | $ | 2,822 | $ | 497 | $ | 261 | $ | 2,512 | $ | 18,177 | ||||||||||||||
(1) | These VIEs are generally financed through the issuance of debt instruments collateralized by assets held by the VIE. Substantially all assets and liabilities held by the firm related to these VIEs are included in “Trading assets, at fair value” and “Trading liabilities, at fair value,” respectively, in the condensed consolidated statements of financial condition. | |
(2) | The firm obtains interests in these VIEs in connection with making investments in real estate, distressed loans and other types of debt, mezzanine instruments and equities. These VIEs are generally financed through the issuance of debt and equity instruments which are either collateralized by or indexed to assets held by the VIE. Substantially all assets and liabilities held by the firm related to these VIEs are included in “Trading assets, at fair value” and “Other assets,” and “Other liabilities and accrued expenses,” respectively, in the condensed consolidated statements of financial condition. | |
(3) | These VIEs are financed through the issuance of debt instruments. Assets and liabilities held by the firm related to these VIEs are included in “Other assets” and “Other liabilities and accrued expenses,” respectively, in the condensed consolidated statements of financial condition. | |
(4) | These VIEs are generally financed through the issuance of equity instruments. Assets and liabilities held by the firm related to these VIEs are included in “Trading assets, at fair value” and “Other liabilities and accrued expenses,” respectively, in the condensed consolidated statement of financial condition. | |
(5) | Such amounts do not represent the anticipated losses in connection with these transactions because they exclude the effect of offsetting financial instruments that are held to mitigate these risks. | |
(6) | Assets in VIE and maximum exposure to loss include $6.99 billion and $4.01 billion, respectively, related to CDOs backed by mortgage obligations as of June 2010. | |
(7) | Primarily consists of written protection on investment-grade, short-term collateral held by VIEs that have issued CDOs. | |
(8) | Primarily consists of total return swaps on CDOs and CLOs. The firm has generally transferred the risks related to the underlying securities through derivatives with non-VIEs. | |
(9) | The aggregate amounts include $4.77 billion and $4.66 billion as of June 2010 and December 2009, respectively, related to guarantees and derivative transactions with VIEs to which the firm transferred assets. |
(10) | Consists of out-of-the-money written put options that provide principal protection to clients invested in various fund products, with risk to the firm mitigated through portfolio rebalancing. Assets related to these VIEs are included in “Trading assets, at fair value” and liabilities related to these VIEs are included in “Other secured financings,” “Unsecured short-term borrowings, including the current portion of unsecured long-term borrowings” or “Unsecured long-term borrowings” in the condensed consolidated statement of financial condition. Assets in VIE, carrying value of liabilities and maximum exposure to loss exclude $3.97 billion as of December 2009, associated with guarantees related to the firm’s performance under borrowings from the VIE, which are recorded as liabilities in the condensed consolidated statement of financial condition. Substantially all of the liabilities included in the table above relate to additional borrowings from the VIE associated with principal-protected notes guaranteed by the firm. These VIEs were consolidated by the firm upon adoption of ASU No. 2009-17. |
As of June 2010 | ||||||||||||||||||||
CDOs,
|
||||||||||||||||||||
Real estate,
|
mortgage-
|
|||||||||||||||||||
credit-related
|
backed and
|
Principal-
|
||||||||||||||||||
and other
|
Municipal bond
|
other asset-
|
protected
|
|||||||||||||||||
investing (1) | securitizations (2) | backed (3) | notes (4) | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Assets
(5)
|
||||||||||||||||||||
Cash and cash equivalents
|
$ | 314 | $ | — | $ | 37 | $ | 148 | $ | 499 | ||||||||||
Cash and securities segregated for regulatory and other purposes
|
173 | — | — | — | 173 | |||||||||||||||
Receivables from brokers, dealers and clearing organizations
|
1 | — | — | — | 1 | |||||||||||||||
Receivables from customers and counterparties
|
4 | 6 | 46 | — | 56 | |||||||||||||||
Trading assets, at fair value
|
2,963 | 650 | 695 | 707 | 5,015 | |||||||||||||||
Other assets
|
3,718 | — | 530 | — | 4,248 | |||||||||||||||
Total
|
$ | 7,173 | $ | 656 | $ | 1,308 | $ | 855 | $ | 9,992 | ||||||||||
Liabilities
|
||||||||||||||||||||
Other secured financings
|
$ | 2,801 | $ | 761 | $ | 510 | $ | 3,142 | $ | 7,214 | ||||||||||
Payables to customers and counterparties
|
6 | — | 28 | — | 34 | |||||||||||||||
Trading liabilities, at fair value
|
— | — | 111 | — | 111 | |||||||||||||||
Unsecured
short-term
borrowings, including the current portion of unsecured
long-term
borrowings
|
263 | — | — | 2,593 | 2,856 | |||||||||||||||
Unsecured
long-term
borrowings
|
29 | — | — | 163 | 192 | |||||||||||||||
Other liabilities and accrued expenses
|
2,351 | — | 39 | — | 2,390 | |||||||||||||||
Total
|
$ | 5,450 | $ | 761 | $ | 688 | $ | 5,898 | $ | 12,797 | ||||||||||
As of December 2009 | ||||||||||||||||||||||||
CDOs,
|
||||||||||||||||||||||||
Real estate,
|
mortgage-
|
Foreign
|
||||||||||||||||||||||
credit-related
|
backed and
|
Principal-
|
exchange
|
|||||||||||||||||||||
and other
|
Municipal bond
|
other asset-
|
protected
|
and
|
||||||||||||||||||||
investing (1) | securitizations (2) | backed (3) | notes (4) | commodities | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Cash and cash equivalents
|
$ | 13 | $ | — | $ | — | $ | — | $ | 13 | $ | 26 | ||||||||||||
Receivables from customers and counterparties
|
1 | — | — | — | — | 1 | ||||||||||||||||||
Trading assets, at fair value
|
721 | 679 | 639 | 214 | 134 | 2,387 | ||||||||||||||||||
Other assets
|
207 | — | — | — | 80 | 287 | ||||||||||||||||||
Total
|
$ | 942 | $ | 679 | $ | 639 | $ | 214 | $ | 227 | $ | 2,701 | ||||||||||||
Liabilities
|
||||||||||||||||||||||||
Securities sold under agreements to repurchase, at fair value
|
$ | — | $ | — | $ | 432 | $ | — | $ | — | $ | 432 | ||||||||||||
Other secured financings
|
620 | 782 | 151 | — | — | 1,553 | ||||||||||||||||||
Payables to customers and counterparties
|
1 | — | — | — | — | 1 | ||||||||||||||||||
Trading liabilities, at fair value
|
— | — | — | — | 169 | 169 | ||||||||||||||||||
Unsecured
short-term
borrowings, including the current portion of unsecured
long-term
borrowings
|
— | — | — | 214 | — | 214 | ||||||||||||||||||
Other liabilities and accrued expenses
|
59 | — | — | — | 10 | 69 | ||||||||||||||||||
Total
|
$ | 680 | $ | 782 | $ | 583 | $ | 214 | $ | 179 | $ | 2,438 | ||||||||||||
(1) | These VIEs are generally financed through the issuance of subordinated liabilities and debt and equity instruments. The VIE liabilities are generally collateralized by or indexed to the related VIE assets and generally do not provide for recourse to the general credit of the firm. |
(2) | These VIEs are generally financed through the issuance of debt instruments and the VIE liabilities are partially collateralized by the related VIE assets. |
(3) | These VIEs are generally financed through the issuance of debt instruments collateralized by assets held by the VIE and the VIE liabilities generally do not provide for recourse to the general credit of the firm. |
(4) | These VIEs are financed through the issuance of debt instruments. |
(5) | A majority of these VIE assets can be used only to settle obligations of the VIE. |
Note 5. | Deposits |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
U.S. offices
(1)
|
$ | 30,461 | $ | 32,797 | ||||
Non-U.S. offices
(2)
|
6,563 | 6,621 | ||||||
Total
|
$ | 37,024 | $ | 39,418 | ||||
(1) | Substantially all U.S. deposits were interest-bearing and were held at GS Bank USA. | |
(2) | Substantially all non-U.S. deposits were interest-bearing and were held at Goldman Sachs Bank (Europe) PLC (GS Bank Europe). |
As of June 2010 | ||||||||||||
U.S. | Non-U.S. | Total | ||||||||||
(in millions) | ||||||||||||
2010
|
$ | 1,343 | $ | 1,020 | $ | 2,363 | ||||||
2011
|
1,761 | 53 | 1,814 | |||||||||
2012
|
1,018 | — | 1,018 | |||||||||
2013
|
1,975 | — | 1,975 | |||||||||
2014
|
495 | — | 495 | |||||||||
2015-thereafter
|
2,253 | — | 2,253 | |||||||||
Total
|
$ | 8,845 | $ | 1,073 | $ | 9,918 | ||||||
Note 6. | Short-Term Borrowings |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Current portion of unsecured
long-term
borrowings
(1)
|
$ | 18,036 | $ | 17,928 | ||||
Hybrid financial instruments
|
12,689 | 10,741 | ||||||
Promissory notes
|
2,238 | 2,119 | ||||||
Commercial paper
|
1,688 | 1,660 | ||||||
Other
short-term
borrowings
|
4,472 | 5,068 | ||||||
Total
(2)
|
$ | 39,123 | $ | 37,516 | ||||
(1) | Includes $3.73 billion and $1.73 billion as of June 2010 and December 2009, respectively, guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program (TLGP). | |
(2) | The weighted average interest rates for these borrowings, after giving effect to hedging activities, were 2.10% and 1.31% as of June 2010 and December 2009, respectively, and excluded financial instruments accounted for at fair value under the fair value option. |
Note 7. | Long-Term Borrowings |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Fixed rate
obligations
(1)
|
$ | 118,569 | $ | 117,413 | ||||
Floating rate
obligations
(2)
|
60,013 | 67,672 | ||||||
Total
(3)
|
$ | 178,582 | $ | 185,085 | ||||
(1) | As of June 2010 and December 2009, $83.45 billion and $79.12 billion, respectively, of the firm’s fixed rate debt obligations were denominated in U.S. dollars and interest rates ranged from 1.20% to 10.04% and 1.63% to 10.04% as of June 2010 and December 2009, respectively. As of June 2010 and December 2009, $35.12 billion and $38.29 billion, respectively, of the firm’s fixed rate debt obligations were denominated in non-U.S. dollars and interest rates ranged from 0.85% to 8.64% and 0.80% to 7.45%, respectively. | |
(2) | As of June 2010 and December 2009, $32.87 billion and $32.26 billion, respectively, of the firm’s floating rate debt obligations were denominated in U.S. dollars. As of June 2010 and December 2009, $27.14 billion and $35.41 billion, respectively, of the firm’s floating rate debt obligations were denominated in non-U.S. dollars. Floating interest rates generally are based on LIBOR or the federal funds target rate. Equity-linked and indexed instruments are included in floating rate obligations. | |
(3) | Includes $16.84 billion and $19.03 billion as of June 2010 and December 2009, respectively, guaranteed by the FDIC under the TLGP. |
As of
|
||||
June 2010 | ||||
(in millions) | ||||
2011
|
$ | 11,647 | ||
2012
|
25,614 | |||
2013
|
22,187 | |||
2014
|
17,109 | |||
2015
|
13,518 | |||
2016-thereafter
|
88,507 | |||
Total
(1)(2)(3)(4)
|
$ | 178,582 | ||
(1) | Unsecured long-term borrowings maturing within one year of the financial statement date and unsecured long-term borrowings that are redeemable within one year of the financial statement date at the option of the holder are included as unsecured short-term borrowings in the condensed consolidated statements of financial condition. | |
(2) | Unsecured long-term borrowings that are repayable prior to maturity at the option of the firm are reflected at their contractual maturity dates. Unsecured long-term borrowings that are redeemable prior to maturity at the option of the holder are reflected at the dates such options become exercisable. | |
(3) | Amount includes an increase of $11.53 billion to the carrying amount of certain of the firm’s unsecured long-term borrowings related to fair value hedges. The amounts related to the carrying value of the firm’s unsecured long-term borrowings associated with fair value hedges by year of maturity are as follows: $50 million in 2011, $633 million in 2012, $850 million in 2013, $950 million in 2014, $477 million in 2015 and $8.57 billion in 2016 and thereafter. | |
(4) | The aggregate contractual principal amount of unsecured long-term borrowings (principal and non-principal protected) for which the fair value option was elected exceeded the related fair value by $936 million. |
As of | ||||||||||||||||
June 2010 | December 2009 | |||||||||||||||
Amount | Rate | Amount | Rate | |||||||||||||
($ in millions) | ||||||||||||||||
Fixed rate obligations
|
$ | 5,186 | 5.08 | % | $ | 4,320 | 5.49 | % | ||||||||
Floating rate
obligations
(1)(2)
|
173,396 | 1.64 | 180,765 | 1.33 | ||||||||||||
Total
|
$ | 178,582 | 1.76 | $ | 185,085 | 1.42 | ||||||||||
(1) | Includes fixed rate obligations that have been converted into floating rate obligations through hedge accounting. | |
(2) | The weighted average interest rates as of June 2010 and December 2009 excluded financial instruments accounted for at fair value under the fair value option. |
Note 8. | Commitments, Contingencies and Guarantees |
Commitment Amount by Period
|
||||||||||||||||||||||||
of Expiration as of June 2010 | Total Commitments as of | |||||||||||||||||||||||
Remainder
|
2011-
|
2013-
|
2015-
|
June
|
December
|
|||||||||||||||||||
of 2010 | 2012 | 2014 | Thereafter | 2010 | 2009 | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Commitments to extend
credit
(1)
|
||||||||||||||||||||||||
Commercial lending:
|
||||||||||||||||||||||||
Investment-grade
|
$ | 3,020 | $ | 5,704 | $ | 2,768 | $ | 31 | $ | 11,523 | $ | 11,415 | ||||||||||||
Non-investment-grade
|
4,223 | 3,507 | 3,026 | 3,373 | 14,129 | 8,153 | ||||||||||||||||||
William Street credit extension program
|
2,693 | 18,146 | 4,714 | 412 | 25,965 | 25,218 | ||||||||||||||||||
Warehouse financing
|
— | 62 | — | — | 62 | 12 | ||||||||||||||||||
Total commitments to extend credit
|
9,936 | 27,419 | 10,508 | 3,816 | 51,679 | 44,798 | ||||||||||||||||||
Forward starting resale and securities borrowing agreements
|
46,675 | — | — | — | 46,675 | 34,844 | ||||||||||||||||||
Forward starting repurchase and securities lending agreements
|
12,945 | — | — | — | 12,945 | 10,545 | ||||||||||||||||||
Underwriting commitments
|
157 | — | — | — | 157 | 1,811 | ||||||||||||||||||
Letters of
credit
(2)
|
913 | 561 | 187 | 4 | 1,665 | 1,804 | ||||||||||||||||||
Investment
commitments
(3)
|
2,136 | 9,015 | 155 | 1,062 | 12,368 | 13,240 | ||||||||||||||||||
Other
|
155 | 60 | 41 | 31 | 287 | 380 | ||||||||||||||||||
Total commitments
|
$ | 72,917 | $ | 37,055 | $ | 10,891 | $ | 4,913 | $ | 125,776 | $ | 107,422 | ||||||||||||
(1) | Commitments to extend credit are presented net of amounts syndicated to third parties. |
(2) | Consists of commitments under letters of credit issued by various banks which the firm provides to counterparties in lieu of securities or cash to satisfy various collateral and margin deposit requirements. |
(3) | Consists of the firm’s commitments to invest in private equity, real estate and other assets directly and through funds that the firm raises and manages in connection with its merchant banking and other investing activities, consisting of $2.40 billion and $2.46 billion as of June 2010 and December 2009, respectively, related to real estate private investments and $9.97 billion and $10.78 billion as of June 2010 and December 2009, respectively, related to corporate and other private investments. Such commitments include $11.35 billion and $11.38 billion as of June 2010 and December 2009, respectively, of commitments to invest in funds managed by the firm, which will be funded at market value on the date of investment. |
• | Commercial lending commitments. The firm’s commercial lending commitments are generally extended in connection with contingent acquisition financing and other types of corporate lending as well as commercial real estate financing. The total commitment amount does not necessarily reflect the actual future cash flow requirements, as the firm may syndicate all or substantial portions of these commitments in the future, the commitments may expire unused, or the commitments may be cancelled or reduced at the request of the counterparty. In addition, commitments that are extended for contingent acquisition financing are often intended to be short-term in nature, as borrowers often seek to replace them with other funding sources. | |
• | William Street credit extension program. Substantially all of the commitments provided under the William Street credit extension program are to investment-grade corporate borrowers. Commitments under the program are principally extended by William Street Commitment Corporation (Commitment Corp.), a consolidated wholly owned subsidiary of GS Bank USA, GS Bank USA and other subsidiaries of GS Bank USA. The commitments extended by Commitment Corp. are supported, in part, by funding raised by William Street Funding Corporation (Funding Corp.), another consolidated wholly owned subsidiary of GS Bank USA. The assets and liabilities of Commitment Corp. and Funding Corp. are legally separated from other assets and liabilities of the firm. The assets of Commitment Corp. and of Funding Corp. will not be available to their respective shareholders until the claims of their respective creditors have been paid. In addition, no affiliate of either Commitment Corp. or Funding Corp., except in limited cases as expressly agreed in writing, is responsible for any obligation of either entity. With respect to most of the William Street commitments, Sumitomo Mitsui Financial Group, Inc. (SMFG) provides the firm with credit loss protection that is generally limited to 95% of the first loss the firm realizes on approved loan commitments, up to a maximum of approximately $950 million. In addition, subject to the satisfaction of certain conditions, upon the firm’s request, SMFG will provide protection for 70% of additional losses on such commitments, up to a maximum of $1.13 billion, of which $375 million of protection had been provided as of both June 2010 and December 2009. The firm also uses other financial instruments to mitigate credit risks related to certain William Street commitments not covered by SMFG. | |
• | Warehouse financing. The firm provides financing for the warehousing of financial assets. These arrangements are secured by the warehoused assets, primarily consisting of residential and commercial mortgages as of June 2010 and December 2009. |
As of
|
||||
June 2010 | ||||
(in millions) | ||||
Remainder of 2010
|
$ | 248 | ||
2011
|
488 | |||
2012
|
363 | |||
2013
|
304 | |||
2014
|
217 | |||
2015-thereafter
|
1,673 | |||
Total
|
$ | 3,293 | ||
Maximum Payout/
|
||||||||||||||||||||||||
Carrying
|
Notional Amount by Period of Expiration (1) | |||||||||||||||||||||||
Value of
|
2011-
|
2013-
|
2015-
|
|||||||||||||||||||||
Net Liability | 2010 | 2012 | 2014 | Thereafter | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
As of June 2010
|
||||||||||||||||||||||||
Derivatives
(2)
|
$ | 8,376 | $ | 105,946 | $ | 305,134 | $ | 53,399 | $ | 61,796 | $ | 526,275 | ||||||||||||
Securities lending
indemnifications
(3)
|
— | 28,659 | — | — | — | 28,659 | ||||||||||||||||||
Other financial
guarantees
(4)
|
174 | 322 | 568 | 300 | 947 | 2,137 |
(1) | Such amounts do not represent the anticipated losses in connection with these contracts. | |
(2) | Because derivative contracts are accounted for at fair value, carrying value is considered the best indication of payment/performance risk for individual contracts. However, the carrying value excludes the effect of a legal right of setoff that may exist under an enforceable netting agreement and the effect of netting of cash posted pursuant to credit support agreements. These derivative contracts are risk managed together with derivative contracts that do not meet the definition of a guarantee under ASC 460 and, therefore, these amounts do not reflect the firm’s overall risk related to its derivative activities. As of December 2009, the carrying value of the net liability related to derivative guarantees was $7.22 billion. | |
(3) | Collateral held by the lenders in connection with securities lending indemnifications was $29.67 billion as of June 2010. Because the contractual nature of these arrangements requires the firm to obtain collateral with a market value that exceeds the value of the securities on loan from the borrower, there is minimal performance risk associated with these guarantees. | |
(4) | As of December 2009, the carrying value of the net liability related to other financial guarantees was $207 million. |
Note 9. | Shareholders’ Equity |
Redemption
|
||||||||||||||||||||
Shares
|
Shares
|
Shares
|
Earliest
|
Value
|
||||||||||||||||
Series | Authorized | Issued | Outstanding | Dividend Rate | Redemption Date | (in millions) | ||||||||||||||
A
|
50,000 | 30,000 | 29,999 |
3 month LIBOR + 0.75%,
with floor of 3.75% per annum |
April 25, 2010 | $ | 750 | |||||||||||||
B
|
50,000 | 32,000 | 32,000 | 6.20% per annum | October 31, 2010 | 800 | ||||||||||||||
C
|
25,000 | 8,000 | 8,000 |
3 month LIBOR + 0.75%,
with floor of 4.00% per annum |
October 31, 2010 | 200 | ||||||||||||||
D
|
60,000 | 54,000 | 53,999 |
3 month LIBOR + 0.67%,
with floor of 4.00% per annum |
May 24, 2011 | 1,350 | ||||||||||||||
G
|
50,000 | 50,000 | 50,000 | 10.00% per annum | October 1, 2008 | 5,500 | ||||||||||||||
235,000 | 174,000 | 173,998 | $ | 8,600 | ||||||||||||||||
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Currency translation adjustment, net of tax
|
$ | (146 | ) | $ | (132 | ) | ||
Pension and postretirement liability adjustments, net of tax
|
(306 | ) | (317 | ) | ||||
Net unrealized gains on
available-for-sale
securities, net of
tax
(1)
|
134 | 87 | ||||||
Total accumulated other comprehensive loss, net of tax
|
$ | (318 | ) | $ | (362 | ) | ||
(1) | Consists of net unrealized gains of $138 million and $84 million on available-for-sale securities held by the firm’s insurance subsidiaries as of June 2010 and December 2009, respectively, and net unrealized gains/(losses) of $(4) million and $3 million on available-for-sale securities held by investees accounted for under the equity method as of June 2010 and December 2009, respectively. |
Note 10. | Earnings Per Common Share |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions, except per share amounts) | ||||||||||||||||
Numerator for basic and diluted EPS — net earnings
applicable to common shareholders
|
$ | 453 | $ | 2,718 | $ | 3,749 | $ | 4,377 | ||||||||
Denominator for basic EPS — weighted average number of
common shares
|
539.8 | 514.1 | 542.9 | 495.7 | ||||||||||||
Effect of dilutive
securities
(1)
|
||||||||||||||||
Restricted stock units
|
14.2 | 15.8 | 13.2 | 12.6 | ||||||||||||
Stock options and warrants
|
26.4 | 21.1 | 29.1 | 11.8 | ||||||||||||
Dilutive potential common shares
|
40.6 | 36.9 | 42.3 | 24.4 | ||||||||||||
Denominator for diluted EPS — weighted average number
of common shares and dilutive potential common shares
|
580.4 | 551.0 | 585.2 | 520.1 | ||||||||||||
Basic
EPS
(2)
|
$ | 0.82 | $ | 5.27 | $ | 6.87 | $ | 8.81 | ||||||||
Diluted EPS
|
0.78 | 4.93 | 6.41 | 8.42 |
(1) | The diluted EPS computations do not include the antidilutive effect of RSUs, stock options and warrants as follows: |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Number of antidilutive RSUs and common shares underlying
antidilutive stock options and warrants
|
6.1 | 14.3 | 6.0 | 53.3 | ||||||||||||
(2) | Unvested share-based payment awards that have non-forfeitable rights to dividends or dividend equivalents are treated as a separate class of securities in calculating earnings per common share. The impact of applying this methodology was a reduction to basic earnings per common share of $0.02 for both the three months ended June 2010 and June 2009, and $0.04 and $0.02 for the six months ended June 2010 and June 2009, respectively. |
Note 11. | Goodwill and Identifiable Intangible Assets |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Investment Banking
|
||||||||
Underwriting
|
$ | 125 | $ | 125 | ||||
Trading and Principal Investments
|
||||||||
FICC
|
298 | 265 | ||||||
Equities
(1)
|
2,361 | 2,389 | ||||||
Principal Investments
|
84 | 84 | ||||||
Asset Management and Securities Services
|
||||||||
Asset
Management
(2)
|
563 | 563 | ||||||
Securities Services
|
117 | 117 | ||||||
Total
|
$ | 3,548 | $ | 3,543 | ||||
(1) | Primarily related to SLK LLC (SLK). | |
(2) | Primarily related to The Ayco Company, L.P. (Ayco). |
As of | ||||||||||
June
|
December
|
|||||||||
2010 | 2009 | |||||||||
(in millions) | ||||||||||
Customer
lists
(1)
|
Gross carrying amount | $ | 1,104 | $ | 1,117 | |||||
Accumulated amortization | (497 | ) | (472 | ) | ||||||
Net carrying amount | $ | 607 | $ | 645 | ||||||
Broadcast
|
Gross carrying amount | $ | 560 | $ | — | |||||
royalties
(2)
|
Accumulated amortization | (31 | ) | — | ||||||
Net carrying amount | $ | 529 | $ | — | ||||||
Commodities-related
|
Gross carrying amount | $ | 596 | $ | 40 | |||||
intangibles
(3)
|
Accumulated amortization | (25 | ) | (10 | ) | |||||
Net carrying amount | $ | 571 | $ | 30 | ||||||
NYSE DMM rights
|
Gross carrying amount | $ | 714 | $ | 714 | |||||
Accumulated amortization | (314 | ) | (294 | ) | ||||||
Net carrying amount | $ | 400 | $ | 420 | ||||||
Insurance-related
|
Gross carrying amount | $ | 292 | $ | 292 | |||||
intangibles
(4)
|
Accumulated amortization | (176 | ) | (142 | ) | |||||
Net carrying amount | $ | 116 | $ | 150 | ||||||
Exchange-traded
|
Gross carrying amount | $ | 138 | $ | 138 | |||||
fund (ETF) lead
|
Accumulated amortization | (51 | ) | (48 | ) | |||||
market maker rights
|
Net carrying amount | $ | 87 | $ | 90 | |||||
Other
(5)
|
Gross carrying amount | $ | 109 | $ | 130 | |||||
Accumulated amortization | (73 | ) | (88 | ) | ||||||
Net carrying amount | $ | 36 | $ | 42 | ||||||
Total
|
Gross carrying amount | $ | 3,513 | $ | 2,431 | |||||
Accumulated amortization | (1,167 | ) | (1,054 | ) | ||||||
Net carrying amount | $ | 2,346 | $ | 1,377 | ||||||
(1) | Primarily includes the firm’s clearance and execution and NASDAQ customer lists related to SLK and financial counseling customer lists related to Ayco. | |
(2) | Represents television broadcast royalties held by a VIE consolidated upon adoption of ASU No. 2009-17. | |
(3) | Primarily includes commodity-related customer contracts and relationships, permits and access rights acquired during the first quarter of 2010. | |
(4) | Primarily includes VOBA related to the firm’s insurance businesses. | |
(5) | Primarily includes marketing-related assets and other contractual rights. |
As of
|
||||
June 2010 | ||||
(in millions) | ||||
Remainder of 2010
|
$ | 134 | ||
2011
|
288 | |||
2012
|
273 | |||
2013
|
251 | |||
2014
|
220 | |||
2015
|
188 |
Note 12. | Other Assets and Other Liabilities |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Property, leasehold improvements and
equipment
(1)(2)
|
$ | 11,958 | $ | 11,380 | ||||
Goodwill and identifiable intangible
assets
(3)
|
5,894 | 4,920 | ||||||
Income tax-related assets
|
6,292 | 7,937 | ||||||
Equity-method
investments
(4)
|
1,359 | 1,484 | ||||||
Miscellaneous receivables and other
|
3,697 | 3,747 | ||||||
Total
|
$ | 29,200 | $ | 29,468 | ||||
(1) | Net of accumulated depreciation and amortization of $7.80 billion and $7.28 billion as of June 2010 and December 2009, respectively. | |
(2) | Includes $5.99 billion and $5.90 billion as of June 2010 and December 2009, respectively, related to property, leasehold improvements and equipment that the firm uses in connection with its operations. The remainder is held by investment entities consolidated by the firm. The increase in property, leasehold improvements and equipment from December 2009 to June 2010 is primarily related to consolidated VIEs. | |
(3) | See Note 11 for further information regarding the firm’s goodwill and identifiable intangible assets. | |
(4) | Excludes investments of $4.00 billion and $2.95 billion accounted for at fair value under the fair value option as of June 2010 and December 2009, respectively, which are included in “Trading assets, at fair value” in the condensed consolidated statements of financial condition. The increase in investments accounted for at fair value under the fair value option from December 2009 to June 2010 is primarily related to investments held by VIEs consolidated upon adoption of ASU No. 2009-17. |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Compensation and benefits
|
$ | 8,729 | $ | 11,170 | ||||
Insurance-related
liabilities
(1)
|
11,411 | 11,832 | ||||||
Noncontrolling
interests
(2)
|
969 | 960 | ||||||
Income tax-related liabilities
|
2,193 | 4,022 | ||||||
Employee interests in consolidated funds
|
442 | 416 | ||||||
Subordinated liabilities issued by consolidated VIEs
|
1,844 | (3) | 612 | |||||
Accrued expenses and other
|
4,812 | 4,843 | ||||||
Total
|
$ | 30,400 | $ | 33,855 | ||||
(1) | Insurance-related liabilities are set forth in the table below: |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Separate account liabilities
|
$ | 3,689 | $ | 4,186 | ||||
Liabilities for future benefits and unpaid claims
|
6,617 | 6,484 | ||||||
Contract holder account balances
|
810 | 874 | ||||||
Reserves for guaranteed minimum death and income benefits
|
295 | 288 | ||||||
Total insurance-related liabilities
|
$ | 11,411 | $ | 11,832 | ||||
(2) | Includes $613 million and $598 million related to consolidated investment funds as of June 2010 and December 2009, respectively. | |
(3) | Includes $1.29 billion related to entities consolidated upon adoption of ASU No. 2009-17. |
Note 13. | Transactions with Affiliated Funds |
Note 14. | Income Taxes |
As of
|
||||
Jurisdiction | June 2010 | |||
U.S. Federal
|
2005 | (1) | ||
New York State and City
|
2004 | (2) | ||
United Kingdom
|
2005 | |||
Japan
|
2005 | (3) | ||
Hong Kong
|
2004 | |||
Korea
|
2003 |
(1) | IRS examination of fiscal 2005, 2006 and 2007 began during 2008. IRS examination of fiscal 2003 and 2004 has been completed but the liabilities for those years are not yet final. | |
(2) | New York State and City examination of fiscal 2004, 2005 and 2006 began in 2008. | |
(3) | Japan National Tax Agency examination of fiscal 2005 through 2009 began during the first quarter of 2010. |
Note 15. | Regulation and Capital Adequacy |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
($ in millions) | ||||||||
Tier 1 capital
|
$ | 68,484 | $ | 64,642 | ||||
Tier 2 capital
|
13,449 | 13,828 | ||||||
Total capital
|
81,933 | 78,470 | ||||||
Risk-weighted
assets
|
451,247 | 431,890 | ||||||
Tier 1 capital ratio
|
15.2 | % | 15.0 | % | ||||
Total capital ratio
|
18.2 | % | 18.2 | % | ||||
Tier 1 leverage ratio
|
8.0 | % | 7.6 | % |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
Tier 1 capital ratio
|
17.5 | % | 14.9 | % | ||||
Total capital ratio
|
22.3 | % | 19.3 | % | ||||
Tier 1 leverage ratio
|
20.0 | % | 15.4 | % |
Note 16. | Business Segments |
As of or for the | ||||||||||||||||||
Three Months
|
Six Months
|
|||||||||||||||||
Ended June | Ended June | |||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||
(in millions) | ||||||||||||||||||
Investment
|
Net revenues | $ | 917 | $ | 1,440 | $ | 2,101 | $ | 2,263 | |||||||||
Banking
|
Operating expenses | 760 | 1,167 | 1,710 | 1,872 | |||||||||||||
Pre-tax earnings | $ | 157 | $ | 273 | $ | 391 | $ | 391 | ||||||||||
Segment assets | $ | 1,339 | $ | 1,473 | $ | 1,339 | $ | 1,473 | ||||||||||
Trading and
|
Net revenues | $ | 6,551 | $ | 10,784 | $ | 16,801 | $ | 17,934 | |||||||||
Principal
|
Operating expenses | 4,954 | 6,290 | 10,519 | 11,163 | |||||||||||||
Investments
|
Pre-tax earnings | $ | 1,597 | $ | 4,494 | $ | 6,282 | $ | 6,771 | |||||||||
Segment assets | $ | 688,612 | $ | 696,454 | $ | 688,612 | $ | 696,454 | ||||||||||
Asset Management
|
Net revenues | $ | 1,373 | $ | 1,537 | $ | 2,714 | $ | 2,989 | |||||||||
and Securities
|
Operating expenses | 1,064 | 1,250 | 2,144 | 2,455 | |||||||||||||
Services
|
Pre-tax earnings | $ | 309 | $ | 287 | $ | 570 | $ | 534 | |||||||||
Segment assets | $ | 193,237 | $ | 191,617 | $ | 193,237 | $ | 191,617 | ||||||||||
Total
|
Net revenues (1)(2) | $ | 8,841 | $ | 13,761 | $ | 21,616 | $ | 23,186 | |||||||||
Operating expenses (3) | 7,393 | 8,732 | 15,009 | 15,528 | ||||||||||||||
Pre-tax earnings (4) | $ | 1,448 | $ | 5,029 | $ | 6,607 | $ | 7,658 | ||||||||||
Total assets | $ | 883,188 | $ | 889,544 | $ | 883,188 | $ | 889,544 | ||||||||||
(1) | Net revenues include net interest income as set forth in the table below: |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Investment Banking
|
$ | — | $ | — | $ | — | $ | — | ||||||||
Trading and Principal Investments
|
1,259 | 1,462 | 2,314 | 2,906 | ||||||||||||
Asset Management and Securities Services
|
360 | 580 | 723 | 1,043 | ||||||||||||
Total net interest
|
$ | 1,619 | $ | 2,042 | $ | 3,037 | $ | 3,949 | ||||||||
(2) | Net revenues include non-interest revenues as set forth in the table below: |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Investment banking fees
|
$ | 917 | $ | 1,440 | $ | 2,101 | $ | 2,263 | ||||||||
Equities commissions
|
977 | 1,021 | 1,858 | 1,995 | ||||||||||||
Asset management and other fees
|
1,013 | 957 | 1,991 | 1,946 | ||||||||||||
Trading and principal investments revenues
|
4,315 | 8,301 | 12,629 | 13,033 | ||||||||||||
Total
non-interest
revenues
|
$ | 7,222 | $ | 11,719 | $ | 18,579 | $ | 19,237 | ||||||||
(3) | Operating expenses include net provisions for a number of litigation and regulatory proceedings of $615 million and $25 million for the three months ended June 2010 and June 2009, respectively, and $636 million and $38 million for the six months ended June 2010 and June 2009, respectively, that have not been allocated to the firm’s segments. |
(4) | Pre-tax earnings include total depreciation and amortization as set forth in the table below: |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Investment Banking
|
$ | 41 | $ | 39 | $ | 85 | $ | 76 | ||||||||
Trading and Principal Investments
|
341 | 428 | 611 | 951 | ||||||||||||
Asset Management and Securities Services
|
58 | 60 | 119 | 149 | ||||||||||||
Total depreciation and amortization
|
$ | 440 | $ | 527 | $ | 815 | $ | 1,176 | ||||||||
Three Months Ended June | Six Months Ended June | |||||||||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||
Net revenues
|
||||||||||||||||||||||||||||||||
Americas
(1)
|
$ | 4,575 | 52 | % | $ | 7,019 | 51 | % | $ | 11,706 | 54 | % | $ | 13,492 | 58 | % | ||||||||||||||||
EMEA
(2)
|
2,146 | 24 | 3,727 | 27 | 6,051 | 28 | 5,613 | 24 | ||||||||||||||||||||||||
Asia
|
2,120 | 24 | 3,015 | 22 | 3,859 | 18 | 4,081 | 18 | ||||||||||||||||||||||||
Total net revenues
|
$ | 8,841 | 100 | % | $ | 13,761 | 100 | % | $ | 21,616 | 100 | % | $ | 23,186 | 100 | % | ||||||||||||||||
Pre-tax
earnings
|
||||||||||||||||||||||||||||||||
Americas
(1)
|
$ | 1,202 | 59 | % | $ | 2,385 | 47 | % | $ | 3,966 | 55 | % | $ | 4,530 | 59 | % | ||||||||||||||||
EMEA
(2)
|
113 | 5 | 1,562 | 31 | 1,913 | 26 | 2,141 | 28 | ||||||||||||||||||||||||
Asia
|
748 | 36 | 1,107 | 22 | 1,364 | 19 | 1,025 | 13 | ||||||||||||||||||||||||
Subtotal
|
2,063 | 100 | % | 5,054 | 100 | % | 7,243 | 100 | % | 7,696 | 100 | % | ||||||||||||||||||||
Corporate
(3)
|
(615 | ) | (25 | ) | (636 | ) | (38 | ) | ||||||||||||||||||||||||
Total
pre-tax
earnings
|
$ | 1,448 | $ | 5,029 | $ | 6,607 | $ | 7,658 | ||||||||||||||||||||||||
(1) | Substantially all relates to the U.S. | |
(2) | EMEA (Europe, Middle East and Africa). Pre-tax earnings includes the impact of the U.K. bank payroll tax for the three and six months ended June 2010. | |
(3) | Consists of net provisions for a number of litigation and regulatory proceedings. |
Note 17. | Interest Income and Interest Expense |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Interest
income
(1)
|
||||||||||||||||
Deposits with banks
|
$ | 18 | $ | 18 | $ | 33 | $ | 40 | ||||||||
Securities borrowed, securities purchased under agreements to
resell and federal funds sold
|
136 | 176 | 215 | 727 | ||||||||||||
Trading assets, at fair value
|
2,785 | 2,881 | 5,406 | 6,039 | ||||||||||||
Other
interest
(2)
|
363 | 395 | 649 | 1,026 | ||||||||||||
Total interest income
|
$ | 3,302 | $ | 3,470 | $ | 6,303 | $ | 7,832 | ||||||||
Interest expense
|
||||||||||||||||
Deposits
|
$ | 69 | $ | 119 | $ | 137 | $ | 269 | ||||||||
Securities loaned and securities sold under agreements to
repurchase, at fair value
|
163 | 366 | 299 | 911 | ||||||||||||
Trading liabilities, at fair value
|
481 | 406 | 976 | 869 | ||||||||||||
Short-term
borrowings
(3)
|
113 | 154 | 231 | 394 | ||||||||||||
Long-term
borrowings
(4)
|
738 | 648 | 1,484 | 1,597 | ||||||||||||
Other
interest
(5)
|
119 | (265 | ) | 139 | (157 | ) | ||||||||||
Total interest expense
|
$ | 1,683 | $ | 1,428 | $ | 3,266 | $ | 3,883 | ||||||||
Net interest income
|
$ | 1,619 | $ | 2,042 | $ | 3,037 | $ | 3,949 | ||||||||
(1) | Interest income is recorded on an accrual basis based on contractual interest rates. | |
(2) | Primarily includes interest income on customer debit balances and other interest-earning assets. | |
(3) | Includes interest on unsecured short-term borrowings and short-term other secured financings. | |
(4) | Includes interest on unsecured long-term borrowings and long-term other secured financings. | |
(5) | Primarily includes interest expense on customer credit balances and other interest-bearing liabilities. |
Three Months Ended June | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Average
|
Average
|
|||||||||||||||||||||||
Average
|
rate
|
Average
|
rate
|
|||||||||||||||||||||
balance | Interest | (annualized) | balance | Interest | (annualized) | |||||||||||||||||||
(in millions, except rates) | ||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Deposits with banks
|
$ | 25,789 | $ | 18 | 0.28 | % | $ | 25,040 | $ | 18 | 0.29 | % | ||||||||||||
U.S.
|
21,519 | 14 | 0.26 | 18,220 | 13 | 0.29 | ||||||||||||||||||
Non-U.S.
|
4,270 | 4 | 0.38 | 6,820 | 5 | 0.29 | ||||||||||||||||||
Securities borrowed, securities purchased under agreements to
resell, at fair value, and federal funds sold
|
357,201 | 136 | 0.15 | 354,792 | 176 | 0.20 | ||||||||||||||||||
U.S.
|
248,180 | 24 | 0.04 | 268,925 | (109 | ) | (0.16 | ) | ||||||||||||||||
Non-U.S.
|
109,021 | 112 | 0.41 | 85,867 | 285 | 1.33 | ||||||||||||||||||
Trading
assets
(1)(2)
|
270,875 | 2,785 | 4.12 | 267,542 | 2,881 | 4.32 | ||||||||||||||||||
U.S.
|
190,166 | 2,178 | 4.59 | 193,117 | 2,231 | 4.63 | ||||||||||||||||||
Non-U.S.
|
80,709 | 607 | 3.02 | 74,425 | 650 | 3.50 | ||||||||||||||||||
Other interest-earning
assets
(3)
|
114,987 | 363 | 1.27 | 125,783 | 395 | 1.26 | ||||||||||||||||||
U.S.
|
79,984 | 200 | 1.00 | 77,381 | 206 | 1.07 | ||||||||||||||||||
Non-U.S.
|
35,003 | 163 | 1.87 | 48,402 | 189 | 1.57 | ||||||||||||||||||
Total interest-earning assets
|
768,852 | 3,302 | 1.72 | 773,157 | 3,470 | 1.80 | ||||||||||||||||||
Cash and due from banks
|
3,193 | 9,428 | ||||||||||||||||||||||
Other noninterest-earning
assets
(2)
|
110,754 | 122,478 | ||||||||||||||||||||||
Total assets
|
$ | 882,799 | $ | 905,063 | ||||||||||||||||||||
Liabilities
|
||||||||||||||||||||||||
Interest-bearing deposits
|
$ | 36,576 | $ | 69 | 0.76 | % | $ | 42,571 | $ | 119 | 1.12 | % | ||||||||||||
U.S.
|
30,024 | 64 | 0.85 | 36,717 | 107 | 1.17 | ||||||||||||||||||
Non-U.S.
|
6,552 | 5 | 0.31 | 5,854 | 12 | 0.82 | ||||||||||||||||||
Securities loaned and securities sold under agreements to
repurchase, at fair value
|
161,571 | 163 | 0.40 | 150,602 | 366 | 0.97 | ||||||||||||||||||
U.S.
|
115,658 | 87 | 0.30 | 108,002 | 110 | 0.41 | ||||||||||||||||||
Non-U.S.
|
45,913 | 76 | 0.66 | 42,600 | 256 | 2.41 | ||||||||||||||||||
Trading
liabilities
(1)(2)
|
90,497 | 481 | 2.13 | 67,262 | 406 | 2.42 | ||||||||||||||||||
U.S.
|
43,979 | 230 | 2.10 | 35,324 | 86 | 0.98 | ||||||||||||||||||
Non-U.S.
|
46,518 | 251 | 2.16 | 31,938 | 320 | 4.02 | ||||||||||||||||||
Commercial paper
|
1,652 | 1 | 0.23 | 381 | — | 0.26 | ||||||||||||||||||
U.S.
|
521 | — | 0.24 | 260 | — | 0.22 | ||||||||||||||||||
Non-U.S.
|
1,131 | 1 | 0.23 | 121 | — | 0.36 | ||||||||||||||||||
Other
borrowings
(4)(5)
|
52,608 | 112 | 0.85 | 60,017 | 154 | 1.03 | ||||||||||||||||||
U.S.
|
29,953 | 95 | 1.27 | 36,250 | 130 | 1.44 | ||||||||||||||||||
Non-U.S.
|
22,655 | 17 | 0.30 | 23,767 | 24 | 0.41 | ||||||||||||||||||
Long-term
borrowings
(5)(6)
|
189,015 | 738 | 1.57 | 205,941 | 648 | 1.26 | ||||||||||||||||||
U.S.
|
179,403 | 684 | 1.53 | 194,460 | 596 | 1.23 | ||||||||||||||||||
Non-U.S.
|
9,612 | 54 | 2.25 | 11,481 | 52 | 1.82 | ||||||||||||||||||
Other interest-bearing
liabilities
(7)
|
184,947 | 119 | 0.26 | 210,979 | (265 | ) | (0.50 | ) | ||||||||||||||||
U.S.
|
140,113 | (45 | ) | (0.13 | ) | 146,049 | (374 | ) | (1.03 | ) | ||||||||||||||
Non-U.S.
|
44,834 | 164 | 1.47 | 64,930 | 109 | 0.67 | ||||||||||||||||||
Total interest-bearing liabilities
|
716,866 | 1,683 | 0.94 | 737,753 | 1,428 | 0.78 | ||||||||||||||||||
Noninterest-bearing deposits
|
213 | 83 | ||||||||||||||||||||||
Other noninterest-bearing
liabilities
(2)
|
92,191 | 100,357 | ||||||||||||||||||||||
Total liabilities
|
809,270 | 838,193 | ||||||||||||||||||||||
Shareholders’ equity
|
||||||||||||||||||||||||
Preferred stock
|
6,957 | 14,125 | ||||||||||||||||||||||
Common stock
|
66,572 | 52,745 | ||||||||||||||||||||||
Total shareholders’ equity
|
73,529 | 66,870 | ||||||||||||||||||||||
Total liabilities, preferred stock and
shareholders’ equity
|
$ | 882,799 | $ | 905,063 | ||||||||||||||||||||
Interest rate spread
|
0.78 | % | 1.02 | % | ||||||||||||||||||||
Net interest income and net yield on
interest-earning assets
|
$ | 1,619 | 0.84 | $ | 2,042 | 1.06 | ||||||||||||||||||
U.S.
|
1,301 | 0.97 | 1,686 | 1.21 | ||||||||||||||||||||
Non-U.S.
|
318 | 0.56 | 356 | 0.66 | ||||||||||||||||||||
Percentage of interest-earning assets and
interest-bearing
liabilities attributable to
non-U.S. operations
(8)
|
||||||||||||||||||||||||
Assets
|
29.79 | % | 27.87 | % | ||||||||||||||||||||
Liabilities
|
24.72 | 24.49 |
Six Months Ended June | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Average
|
Average
|
|||||||||||||||||||||||
Average
|
rate
|
Average
|
rate
|
|||||||||||||||||||||
balance | Interest | (annualized) | balance | Interest | (annualized) | |||||||||||||||||||
(in millions, except rates) | ||||||||||||||||||||||||
Assets
|
||||||||||||||||||||||||
Deposits with banks
|
$ | 25,748 | $ | 33 | 0.26 | % | $ | 22,960 | $ | 40 | 0.35 | % | ||||||||||||
U.S.
|
20,730 | 25 | 0.24 | 18,321 | 26 | 0.28 | ||||||||||||||||||
Non-U.S.
|
5,018 | 8 | 0.32 | 4,639 | 14 | 0.61 | ||||||||||||||||||
Securities borrowed, securities purchased under agreements to
resell, at fair value, and federal funds sold
|
354,904 | 215 | 0.12 | 355,035 | 727 | 0.41 | ||||||||||||||||||
U.S.
|
245,287 | (3 | ) | 0.00 | 266,682 | 52 | 0.04 | |||||||||||||||||
Non-U.S.
|
109,617 | 218 | 0.40 | 88,353 | 675 | 1.53 | ||||||||||||||||||
Trading
assets
(1)(2)
|
270,465 | 5,406 | 4.03 | 281,637 | 6,039 | 4.30 | ||||||||||||||||||
U.S.
|
188,310 | 4,142 | 4.44 | 205,771 | 4,807 | 4.69 | ||||||||||||||||||
Non-U.S.
|
82,155 | 1,264 | 3.10 | 75,866 | 1,232 | 3.26 | ||||||||||||||||||
Other interest-earning
assets
(3)
|
111,642 | 649 | 1.17 | 142,857 | 1,026 | 1.44 | ||||||||||||||||||
U.S.
|
77,506 | 346 | 0.90 | 93,725 | 568 | 1.22 | ||||||||||||||||||
Non-U.S.
|
34,136 | 303 | 1.79 | 49,132 | 458 | 1.87 | ||||||||||||||||||
Total interest-earning assets
|
762,759 | 6,303 | 1.67 | 802,489 | 7,832 | 1.96 | ||||||||||||||||||
Cash and due from banks
|
2,942 | 6,344 | ||||||||||||||||||||||
Other noninterest-earning
assets
(2)
|
109,942 | 133,510 | ||||||||||||||||||||||
Total assets
|
$ | 875,643 | $ | 942,343 | ||||||||||||||||||||
Liabilities
|
||||||||||||||||||||||||
Interest-bearing deposits
|
$ | 37,801 | $ | 137 | 0.73 | % | $ | 41,049 | $ | 269 | 1.31 | % | ||||||||||||
U.S.
|
31,180 | 127 | 0.82 | 35,493 | 243 | 1.37 | ||||||||||||||||||
Non-U.S.
|
6,621 | 10 | 0.30 | 5,556 | 26 | 0.94 | ||||||||||||||||||
Securities loaned and securities sold under agreements to
repurchase, at fair value
|
155,631 | 299 | 0.39 | 168,946 | 911 | 1.08 | ||||||||||||||||||
U.S.
|
111,458 | 142 | 0.26 | 122,369 | 259 | 0.42 | ||||||||||||||||||
Non-U.S.
|
44,173 | 157 | 0.72 | 46,577 | 652 | 2.81 | ||||||||||||||||||
Trading
liabilities
(1)(2)
|
87,186 | 976 | 2.26 | 65,273 | 869 | 2.67 | ||||||||||||||||||
U.S.
|
44,709 | 459 | 2.07 | 33,166 | 238 | 1.44 | ||||||||||||||||||
Non-U.S.
|
42,477 | 517 | 2.45 | 32,107 | 631 | 3.94 | ||||||||||||||||||
Commercial paper
|
1,673 | 2 | 0.25 | 525 | 3 | 1.15 | ||||||||||||||||||
U.S.
|
422 | — | 0.18 | 322 | 3 | 1.87 | ||||||||||||||||||
Non-U.S.
|
1,251 | 2 | 0.27 | 203 | — | 0.19 | ||||||||||||||||||
Other
borrowings
(4)(5)
|
50,934 | 229 | 0.91 | 67,122 | 391 | 1.17 | ||||||||||||||||||
U.S.
|
29,736 | 193 | 1.31 | 42,701 | 337 | 1.58 | ||||||||||||||||||
Non-U.S.
|
21,198 | 36 | 0.34 | 24,421 | 54 | 0.44 | ||||||||||||||||||
Long-term
borrowings
(5)(6)
|
191,243 | 1,484 | 1.56 | 203,337 | 1,597 | 1.58 | ||||||||||||||||||
U.S.
|
181,049 | 1,363 | 1.52 | 191,978 | 1,470 | 1.54 | ||||||||||||||||||
Non-U.S.
|
10,194 | 121 | 2.39 | 11,359 | 127 | 2.24 | ||||||||||||||||||
Other interest-bearing
liabilities
(7)
|
187,009 | 139 | 0.15 | 218,758 | (157 | ) | (0.14 | ) | ||||||||||||||||
U.S.
|
142,003 | (129 | ) | (0.18 | ) | 152,450 | (447 | ) | (0.59 | ) | ||||||||||||||
Non-U.S.
|
45,006 | 268 | 1.20 | 66,308 | 290 | 0.88 | ||||||||||||||||||
Total interest-bearing liabilities
|
711,477 | 3,266 | 0.93 | 765,010 | 3,883 | 1.02 | ||||||||||||||||||
Noninterest-bearing deposits
|
226 | 83 | ||||||||||||||||||||||
Other noninterest-bearing
liabilities
(2)
|
90,954 | 112,083 | ||||||||||||||||||||||
Total liabilities
|
802,657 | 877,176 | ||||||||||||||||||||||
Shareholders’ equity
|
||||||||||||||||||||||||
Preferred stock
|
6,957 | 15,139 | ||||||||||||||||||||||
Common stock
|
66,029 | 50,028 | ||||||||||||||||||||||
Total shareholders’ equity
|
72,986 | 65,167 | ||||||||||||||||||||||
Total liabilities, preferred stock and
shareholders’ equity
|
$ | 875,643 | $ | 942,343 | ||||||||||||||||||||
Interest rate spread
|
0.74 | % | 0.94 | % | ||||||||||||||||||||
Net interest income and net yield on
interest-earning assets
|
$ | 3,037 | 0.80 | $ | 3,949 | 0.99 | ||||||||||||||||||
U.S.
|
2,355 | 0.89 | 3,350 | 1.15 | ||||||||||||||||||||
Non-U.S.
|
682 | 0.60 | 599 | 0.55 | ||||||||||||||||||||
Percentage of interest-earning assets and
interest-bearing
liabilities attributable to
non-U.S. operations
(8)
|
||||||||||||||||||||||||
Assets
|
30.28 | % | 27.16 | % | ||||||||||||||||||||
Liabilities
|
24.02 | 24.38 |
(1) | Consists of cash trading instruments, including equity securities and convertible debentures. |
(2) | Derivative instruments are included in other noninterest-earning assets and other noninterest-bearing liabilities. |
(3) | Primarily consists of cash and securities segregated for regulatory and other purposes and receivables from customers and counterparties. |
(4) | Consists of short-term other secured financings and unsecured short-term borrowings, excluding commercial paper. |
(5) | Interest rates include the effects of interest rate swaps accounted for as hedges. |
(6) | Consists of long-term other secured financings and unsecured long-term borrowings. |
(7) | Primarily consists of payables to customers and counterparties. |
(8) | Assets, liabilities and interest are attributed to U.S. and non-U.S. based on the location of the legal entity in which the assets and liabilities are held. |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Annualized net earnings to average assets
|
0.7 | % (3) | 1.5 | % | 1.1 | % (3) | 1.1 | % | ||||||||
Annualized return on average common
shareholders’ equity
(1)
|
7.9 | (3) | 23.0 | (4) | 13.1 | (3) | 18.3 | (4) | ||||||||
Annualized return on average total
shareholders’ equity
(2)
|
8.0 | (3) | 20.5 | 12.7 | (3) | 16.1 | ||||||||||
Total average equity to average assets
|
8.3 | 7.4 | 8.3 | 6.9 |
(1) | Based on annualized net earnings applicable to common shareholders divided by average monthly common shareholders’ equity. | |
(2) | Based on annualized net earnings divided by average monthly total shareholders’ equity. | |
(3) | The $600 million U.K. bank payroll tax and the $550 million SEC settlement were not annualized in the calculation of annualized net earnings or annualized return as these are one-time events and therefore these amounts have no impact on other quarters in the year. | |
(4) | The one-time preferred dividend of $426 million related to the repurchase of the firm’s preferred stock issued pursuant to the U.S. Treasury’s TARP Capital Purchase Program (calculated as the difference between the carrying value and the redemption value of the preferred stock) in the second quarter of 2009 was not annualized in the calculation of annualized return since it was a one-time event and therefore it has no impact on other quarters in the year. |
As of June 2010 | ||||||||||||||||
Banks | Governments | Other | Total | |||||||||||||
(in millions) | ||||||||||||||||
Country
|
||||||||||||||||
United Kingdom
|
$ | 5,878 | $ | 5,554 | $ | 51,720 | $ | 63,152 | ||||||||
Cayman Islands
|
8 | — | 33,470 | 33,478 | ||||||||||||
France
|
15,045 | 2,536 | 6,487 | 24,068 | ||||||||||||
Japan
|
18,430 | 13 | 3,445 | 21,888 | ||||||||||||
China
|
13,352 | 1,479 | 2,211 | 17,042 | ||||||||||||
Germany
|
9,176 | 2,308 | 1,739 | 13,223 | ||||||||||||
Switzerland
|
2,009 | 46 | 6,735 | 8,790 | ||||||||||||
Netherlands
|
1,929 | 179 | 4,750 | 6,858 |
As of December 2009 | ||||||||||||||||
Banks | Governments | Other | Total | |||||||||||||
(in millions) | ||||||||||||||||
Country
|
||||||||||||||||
United Kingdom
|
$ | 3,284 | $ | 4,843 | $ | 51,664 | $ | 59,791 | ||||||||
Japan
|
18,259 | 107 | 4,833 | 23,199 | ||||||||||||
Cayman Islands
|
53 | 16 | 21,476 | 21,545 | ||||||||||||
France
|
8,846 | 4,648 | 5,655 | 19,149 | ||||||||||||
Germany
|
8,610 | 6,080 | 2,885 | 17,575 | ||||||||||||
China
|
9,105 | 108 | 4,187 | 13,400 | ||||||||||||
Ireland
|
5,634 | 20 | 1,577 | 7,231 |
Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Page
|
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91 | ||||
92 | ||||
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102 | ||||
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125 | ||||
127 | ||||
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133 | ||||
137 | ||||
146 | ||||
147 |
• | Investment Banking. We provide a broad range of investment banking services to a diverse group of corporations, financial institutions, investment funds, governments and individuals. | |
• | Trading and Principal Investments. We facilitate client transactions with a diverse group of corporations, financial institutions, investment funds, governments and individuals through market making in, trading of and investing in fixed income and equity products, currencies, commodities and derivatives on these products. We also take proprietary positions on certain of these products. In addition, we engage in market-making activities on equities and options exchanges, and we clear client transactions on major stock, options and futures exchanges worldwide. In connection with our merchant banking and other investing activities, we make principal investments directly and through funds that we raise and manage. | |
• | Asset Management and Securities Services. We provide investment and wealth advisory services and offer investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse group of institutions and individuals worldwide and provide prime brokerage services, financing services and securities lending services to institutional clients, including hedge funds, mutual funds, pension funds and foundations, and to high-net-worth individuals worldwide. |
As of June 2010 | As of December 2009 | |||||||||||||||
Trading
|
Trading
|
Trading
|
Trading
|
|||||||||||||
Assets, at
|
Liabilities, at
|
Assets, at
|
Liabilities, at
|
|||||||||||||
Fair Value | Fair Value | Fair Value | Fair Value | |||||||||||||
Cash trading instruments
|
$ | 231,362 | $ | 89,596 | $ | 244,124 | $ | 72,117 | ||||||||
ICBC
|
9,683 | (1) | — | 8,111 | (1) | — | ||||||||||
SMFG
|
— | — | 933 | 893 | (5) | |||||||||||
Other principal investments
|
14,022 | (2) | — | 13,981 | (2) | — | ||||||||||
Principal investments
|
23,705 | — | 23,025 | 893 | ||||||||||||
Cash instruments
|
255,067 | 89,596 | 267,149 | 73,010 | ||||||||||||
Exchange-traded
|
6,518 | 2,453 | 6,831 | 2,548 | ||||||||||||
Over-the-counter
|
73,283 | 55,121 | 68,422 | 53,461 | ||||||||||||
Derivative contracts
|
79,801 | (3) | 57,574 | (4) | 75,253 | (3) | 56,009 | (4) | ||||||||
Total
|
$ | 334,868 | $ | 147,170 | $ | 342,402 | $ | 129,019 | ||||||||
(1) | Includes interests of $6.10 billion and $5.13 billion as of June 2010 and December 2009, respectively, held by investment funds managed by Goldman Sachs. The fair value of our investment in the ordinary shares of ICBC, which trade on The Stock Exchange of Hong Kong, includes the effect of foreign exchange revaluation for which we maintain an economic currency hedge. | |
(2) | The following table sets forth the principal investments (other than our investments in ICBC and Sumitomo Mitsui Financial Group, Inc. (SMFG)) included within the Principal Investments component of our Trading and Principal Investments segment: |
As of June 2010 | As of December 2009 | |||||||||||||||||||||||
Corporate | Real Estate | Total | Corporate | Real Estate | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Private
|
$ | 9,989 | $ | 1,201 | $ | 11,190 | $ | 9,507 | $ | 1,325 | $ | 10,832 | ||||||||||||
Public
|
2,781 | 51 | 2,832 | 3,091 | 58 | 3,149 | ||||||||||||||||||
Total
|
$ | 12,770 | $ | 1,252 | $ | 14,022 | $ | 12,598 | $ | 1,383 | $ | 13,981 | ||||||||||||
(3) | Net of cash received pursuant to credit support agreements of $113.76 billion and $124.60 billion as of June 2010 and December 2009, respectively. | |
(4) | Net of cash posted pursuant to credit support agreements of $17.65 billion and $14.74 billion as of June 2010 and December 2009, respectively. | |
(5) | Represents an economic hedge on the shares of common stock underlying our investment in the convertible preferred stock of SMFG. |
• | Cash Trading Instruments. Our cash trading instruments (e.g., equity and debt securities) are generally valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted prices in active markets include U.S. and non-U.S. government obligations, actively traded listed equities and certain money market instruments. |
• | Public Principal Investments. Our public principal investments held within the Principal Investments component of our Trading and Principal Investments segment tend to be large, concentrated holdings resulting from initial public offerings or other corporate transactions, and are valued based on quoted market prices. For positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability. Such adjustments are generally based on market evidence where available. In the absence of such evidence, management’s best estimate is used. |
• | Private Principal Investments. Our private principal investments held within the Principal Investments component of our Trading and Principal Investments segment include investments in private equity, debt and real estate, primarily held through investment funds. By their nature, these investments have little or no price transparency. We value such instruments initially at transaction price and adjust valuations when evidence is available to support such adjustments. Such evidence includes recent third-party investments or pending transactions, third-party independent appraisals, transactions in similar instruments, discounted cash flow techniques, valuation multiples and public comparables. |
As of | ||||||||||||
June
|
March
|
December
|
||||||||||
2010 | 2010 | 2009 | ||||||||||
Mortgage and other
asset-backed
loans and securities:
|
||||||||||||
Loans and securities backed by commercial real estate
|
$ | 3,868 | $ | 4,070 | $ | 4,620 | ||||||
Loans and securities backed by residential real estate
|
2,124 | 2,131 | 1,880 | |||||||||
Loan
portfolios
(1)
|
1,258 | 1,291 | 1,364 | |||||||||
Bank loans and bridge
loans
(2)
|
9,573 | 9,323 | 9,560 | |||||||||
Corporate debt
securities
(3)
|
2,592 | 2,703 | 2,235 | |||||||||
State and municipal obligations
|
825 | 870 | 1,114 | |||||||||
Other debt obligations
|
1,376 | 1,487 | 2,235 | |||||||||
Equities and convertible
debentures
(4)
|
10,335 | 10,653 | 11,871 | |||||||||
Total cash instruments
|
31,951 | 32,528 | 34,879 | |||||||||
Derivative contracts
|
13,956 | 12,123 | 11,596 | |||||||||
Securities purchased under agreements to resell
|
— | 268 | — | |||||||||
Receivables from customers and counterparties
|
218 | 234 | — | |||||||||
Total level 3 assets at fair value
|
46,125 | 45,153 | 46,475 | |||||||||
Level 3 assets for which we do not bear economic
exposure
(5)
|
(2,609 | ) | (2,640 | ) | (3,127 | ) | ||||||
Level 3 assets for which we bear economic exposure
|
$ | 43,516 | $ | 42,513 | $ | 43,348 | ||||||
(1) | Consists of acquired portfolios of distressed loans, primarily backed by commercial and residential real estate collateral. | |
(2) | Includes certain mezzanine financing, leveraged loans arising from capital market transactions and other corporate bank debt. | |
(3) | Includes $775 million, $802 million and $741 million as of June 2010, March 2010 and December 2009, respectively, of CDOs and collateralized loan obligations backed by corporate obligations. | |
(4) | Substantially all consists of private equity investments and real estate fund investments. Real estate investments were $918 million, $968 million and $1.23 billion as of June 2010, March 2010 and December 2009, respectively. | |
(5) | We do not bear economic exposure to these level 3 assets as they are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds. |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
Prime
(1)
|
$ | 2,259 | $ | 2,483 | ||||
Alt-A
|
1,280 | 1,761 | ||||||
Subprime
(2)
|
2,680 | 2,460 | ||||||
Total
(3)
|
$ | 6,219 | $ | 6,704 | ||||
(1) | Excludes U.S. government agency-issued collateralized mortgage obligations of $8.78 billion and $8.62 billion as of June 2010 and December 2009, respectively. Also excludes U.S. government agency-issued mortgage pass-through certificates. | |
(2) | Includes $419 million and $381 million of CDOs backed by subprime mortgages as of June 2010 and December 2009, respectively. | |
(3) | Includes $2.12 billion and $1.88 billion of financial instruments (primarily loans and investment-grade securities, the majority of which were issued during 2006 and 2007) classified within level 3 of the fair value hierarchy as of June 2010 and December 2009, respectively. |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
Americas
(1)
|
$ | 5,278 | $ | 5,157 | ||||
EMEA
(2)
|
571 | 1,032 | ||||||
Asia
|
10 | 14 | ||||||
Total
(3)
|
$ | 5,859 | (4) | $ | 6,203 | (5) | ||
(1) | Substantially all relates to the U.S. | |
(2) | EMEA (Europe, Middle East and Africa). | |
(3) | Includes $3.87 billion and $4.62 billion of financial instruments classified within level 3 of the fair value hierarchy as of June 2010 and December 2009, respectively. | |
(4) | Comprised of loans of $3.86 billion and commercial mortgage-backed securities of $2.00 billion as of June 2010, of which $4.15 billion was floating rate and $1.71 billion was fixed rate. | |
(5) | Comprised of loans of $4.70 billion and commercial mortgage-backed securities of $1.50 billion as of December 2009, of which $5.68 billion was floating rate and $519 million was fixed rate. |
• | certain unsecured short-term borrowings, consisting of all promissory notes and commercial paper and certain hybrid financial instruments; | |
• | certain other secured financings, primarily transfers of financial assets accounted for as financings rather than sales, debt raised through our William Street credit extension program and certain other nonrecourse financings; | |
• | certain unsecured long-term borrowings, including prepaid physical commodity transactions and certain hybrid financial instruments; | |
• | resale and repurchase agreements; | |
• | securities borrowed and loaned within Trading and Principal Investments, consisting of our matched book and certain firm financing activities; | |
• | certain deposits issued by our bank subsidiaries, as well as securities held by GS Bank USA; | |
• | certain receivables from customers and counterparties, including certain margin loans, transfers of financial assets accounted for as secured loans rather than purchases and prepaid variable share forwards; | |
• | certain insurance and reinsurance contracts and certain guarantees; | |
• | certain subordinated liabilities issued by consolidated VIEs; and | |
• | in general, investments acquired after November 24, 2006, when the fair value option became available, where we have significant influence over the investee and would otherwise apply the equity method of accounting. In certain cases, we apply the equity method of accounting to new investments that are strategic in nature or closely related to our principal business activities, where we have a significant degree of involvement in the cash flows or operations of the investee, or where cost-benefit considerations are less significant. |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
Investment Banking
|
||||||||
Underwriting
|
$ | 125 | $ | 125 | ||||
Trading and Principal Investments
|
||||||||
FICC
|
298 | 265 | ||||||
Equities
(1)
|
2,361 | 2,389 | ||||||
Principal Investments
|
84 | 84 | ||||||
Asset Management and Securities Services
|
||||||||
Asset
Management
(2)
|
563 | 563 | ||||||
Securities Services
|
117 | 117 | ||||||
Total
|
$ | 3,548 | $ | 3,543 | ||||
(1) | Primarily related to SLK. | |
(2) | Primarily related to Ayco. |
As of June 2010 | As of December 2009 | |||||||||||
Range of Estimated
|
||||||||||||
Carrying
|
Remaining Lives
|
Carrying
|
||||||||||
Value | (in years) | Value | ||||||||||
Customer
lists
(1)
|
$ | 607 | 1-15 | $ | 645 | |||||||
Broadcast
royalties
(2)
|
529 | 9 | — | |||||||||
Commodities-related
intangibles
(3)
|
571 | 1-49 | 30 | |||||||||
New York Stock Exchange (NYSE) Designated Market Maker
(DMM) rights
|
400 | 11 | 420 | |||||||||
Insurance-related
intangibles
(4)
|
116 | 6 | 150 | |||||||||
Exchange-traded
fund (ETF) lead market maker rights
|
87 | 17 | 90 | |||||||||
Other
(5)
|
36 | 1-7 | 42 | |||||||||
Total
|
$ | 2,346 | $ | 1,377 | ||||||||
(1) | Primarily includes our clearance and execution and NASDAQ customer lists related to SLK and financial counseling customer lists related to Ayco. | |
(2) | Represents television broadcast royalties held by a VIE consolidated upon adoption of Accounting Standards Update (ASU) No. 2009-17, “Consolidations (Topic 810) — Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.” | |
(3) | Primarily includes commodity-related customer contracts and relationships, permits and access rights acquired during the first quarter of 2010. | |
(4) | Primarily includes the value of business acquired related to our insurance businesses. | |
(5) | Primarily includes marketing-related assets and other contractual rights. |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net revenues
|
$ | 8,841 | $ | 13,761 | $ | 21,616 | $ | 23,186 | ||||||||
Pre-tax
earnings
|
1,448 | 5,029 | 6,607 | 7,658 | ||||||||||||
Net earnings
|
613 | 3,435 | 4,069 | 5,249 | ||||||||||||
Net earnings applicable to common shareholders
|
453 | 2,718 | 3,749 | 4,377 | ||||||||||||
Diluted earnings per common share
|
0.78 | 4.93 | 6.41 | 8.42 | ||||||||||||
Annualized return on average common shareholders’
equity
(1)
|
7.9 | % | 23.0 | % | 13.1 | % | 18.3 | % | ||||||||
Diluted earnings per common share, excluding the impact of U.K.
bank payroll tax and SEC
settlement
(2)
|
$ | 2.75 | N/A | $ | 8.36 | N/A | ||||||||||
Annualized return on average common shareholders’ equity,
excluding the impact of U.K. bank payroll tax and SEC
settlement
(2)
|
9.5 | % | N/A | 14.8 | % | N/A |
(1) | Annualized ROE is computed by dividing annualized net earnings applicable to common shareholders by average monthly common shareholders’ equity. The $600 million U.K. bank payroll tax and the $550 million SEC settlement were not annualized in the calculation of annualized net earnings applicable to common shareholders for the three and six months ended June 2010 as these are one-time events and therefore these amounts have no impact on other quarters in the year. In addition, the one-time preferred dividend of $426 million related to the repurchase of our preferred stock issued pursuant to the U.S. Treasury’s TARP Capital Purchase Program (calculated as the difference between the carrying value and the redemption value of the preferred stock) in the second quarter of 2009 was not annualized in the calculation of annualized net earnings applicable to common shareholders for the three and six months ended June 2009 since it was a one-time event and therefore it has no impact on other quarters in the year. The following table sets forth our average common shareholders’ equity: |
Average for the | ||||||||||||||||
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in millions) | ||||||||||||||||
Total shareholders’ equity
|
$ | 73,529 | $ | 66,870 | $ | 72,986 | $ | 65,167 | ||||||||
Preferred stock
|
(6,957 | ) | (14,125 | ) | (6,957 | ) | (15,139 | ) | ||||||||
Common shareholders’ equity
|
$ | 66,572 | $ | 52,745 | $ | 66,029 | $ | 50,028 | ||||||||
(2) | We believe that presenting our results excluding the impact of the $600 million U.K. bank payroll tax and the $550 million SEC settlement is meaningful as these are one-time events and excluding them increases the comparability of period-to-period results. The following tables set forth the calculation of net earnings applicable to common shareholders, diluted earnings per common share and average common shareholders’ equity excluding the impact of these amounts: |
Three Months
|
Six Months
|
|||||||
Ended June | Ended June | |||||||
2010 | 2010 | |||||||
(in millions, except
|
||||||||
per share amounts) | ||||||||
Net earnings applicable to common shareholders
|
$ | 453 | $ | 3,749 | ||||
Impact of U.K. bank payroll tax
|
600 | 600 | ||||||
Pre-tax
impact of SEC settlement
|
550 | 550 | ||||||
Tax impact of SEC settlement
|
(6 | ) | (6 | ) | ||||
Net earnings applicable to common shareholders, excluding the
impact of U.K. bank payroll tax and SEC settlement
|
$ | 1,597 | $ | 4,893 | ||||
Divided by: average diluted common shares outstanding
|
580.4 | 585.2 | ||||||
Diluted earnings per common share, excluding the impact of U.K.
bank payroll tax and SEC settlement
|
$ | 2.75 | $ | 8.36 | ||||
Average for the | ||||||||
Three Months
|
Six Months
|
|||||||
Ended June | Ended June | |||||||
2010 | 2010 | |||||||
(in millions) | ||||||||
Total shareholders’ equity
|
$ | 73,529 | $ | 72,986 | ||||
Preferred stock
|
(6,957 | ) | (6,957 | ) | ||||
Common shareholders’ equity
|
66,572 | 66,029 | ||||||
Impact of U.K. bank payroll tax on average common
shareholders’ equity
|
300 | 171 | ||||||
Impact of SEC settlement on average common shareholders’
equity
|
136 | 78 | ||||||
Common shareholders’ equity, excluding the impact of U.K.
bank payroll tax and SEC settlement
|
$ | 67,008 | $ | 66,278 | ||||
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Compensation and benefits
|
$ | 3,802 | $ | 6,649 | $ | 9,295 | $ | 11,361 | ||||||||
U.K. bank payroll tax
|
600 | — | 600 | — | ||||||||||||
Brokerage, clearing, exchange and
distribution fees |
622 | 574 | 1,184 | 1,110 | ||||||||||||
Market development
|
116 | 82 | 226 | 150 | ||||||||||||
Communications and technology
|
186 | 173 | 362 | 346 | ||||||||||||
Depreciation and amortization
|
437 | 426 | 809 | 975 | ||||||||||||
Occupancy
|
274 | 242 | 530 | 483 | ||||||||||||
Professional fees
|
227 | 145 | 409 | 280 | ||||||||||||
Other expenses
|
1,129 | 441 | 1,594 | 823 | ||||||||||||
Total
non-compensation
expenses
|
2,991 | 2,083 | 5,114 | 4,167 | ||||||||||||
Total operating expenses
|
$ | 7,393 | $ | 8,732 | $ | 15,009 | $ | 15,528 | ||||||||
Total staff at period
end
(1)
|
34,100 | 31,200 | ||||||||||||||
Total staff at period end including consolidated entities held
for investment
purposes
(2)
|
38,900 | 35,100 |
(1) | Includes employees, consultants and temporary staff. | |
(2) | Compensation and benefits and non-compensation expenses related to consolidated entities held for investment purposes are included in their respective line items in the condensed consolidated statements of earnings. Consolidated entities held for investment purposes are entities that are held strictly for capital appreciation, have a defined exit strategy and are engaged in activities that are not closely related to our principal businesses. |
(1) | Our total compensation and benefits expenses including the $600 million U.K. bank payroll tax were $4.40 billion and $9.90 billion for the three and six months ended June 2010, respectively. We believe that presenting our ratio of compensation and benefits to net revenues excluding the impact of the $600 million U.K. bank payroll tax is meaningful as this is a one-time event and excluding it increases the comparability of period-to-period results. |
Six Months Ended
|
||||
June 2010 | ||||
($ in millions) | ||||
Compensation and benefits (which excludes the impact of the
$600 million U.K. bank payroll tax)
|
$ | 9,295 | ||
Ratio of compensation and benefits to net revenues
|
43.0 | % | ||
Compensation and benefits, including the impact of the
$600 million U.K. bank payroll tax
|
$ | 9,895 | ||
Ratio of compensation and benefits to net revenues, including
the impact of the $600 million U.K. bank payroll tax
|
45.8 | % |
(1) | We believe that presenting our effective income tax rate excluding the impact of the $600 million U.K. bank payroll tax and the $550 million SEC settlement, substantially all of which is non-deductible, is meaningful as these are one-time events and excluding them increases the comparability of period-to-period results. The following table sets forth the calculation of the effective income tax rate excluding the impact of these amounts: |
Six Months Ended June 2010 | ||||||||||||
Pre-tax
|
Provision
|
Effective
|
||||||||||
earnings | for taxes | income tax rate | ||||||||||
($ in millions) | ||||||||||||
As reported
|
$ | 6,607 | $ | 2,538 | 38.4 | % | ||||||
Add back:
|
||||||||||||
Impact of U.K. bank payroll tax
|
600 | — | ||||||||||
Impact of SEC settlement
|
550 | 6 | ||||||||||
As adjusted
|
$ | 7,757 | $ | 2,544 | 32.8 | % | ||||||
Three Months
|
Six Months
|
|||||||||||||||||
Ended June | Ended June | |||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||
Investment
|
Net revenues | $ | 917 | $ | 1,440 | $ | 2,101 | $ | 2,263 | |||||||||
Banking
|
Operating expenses | 760 | 1,167 | 1,710 | 1,872 | |||||||||||||
Pre-tax earnings | $ | 157 | $ | 273 | $ | 391 | $ | 391 | ||||||||||
Trading and Principal
|
Net revenues | $ | 6,551 | $ | 10,784 | $ | 16,801 | $ | 17,934 | |||||||||
Investments
|
Operating expenses | 4,954 | 6,290 | 10,519 | 11,163 | |||||||||||||
Pre-tax earnings | $ | 1,597 | $ | 4,494 | $ | 6,282 | $ | 6,771 | ||||||||||
Asset Management and
|
Net revenues | $ | 1,373 | $ | 1,537 | $ | 2,714 | $ | 2,989 | |||||||||
Securities Services
|
Operating expenses | 1,064 | 1,250 | 2,144 | 2,455 | |||||||||||||
Pre-tax earnings | $ | 309 | $ | 287 | $ | 570 | $ | 534 | ||||||||||
Total
|
Net revenues | $ | 8,841 | $ | 13,761 | $ | 21,616 | $ | 23,186 | |||||||||
Operating expenses (1) | 7,393 | 8,732 | 15,009 | 15,528 | ||||||||||||||
Pre-tax earnings | $ | 1,448 | $ | 5,029 | $ | 6,607 | $ | 7,658 | ||||||||||
(1) | Operating expenses include net provisions for a number of litigation and regulatory proceedings of $615 million and $25 million for the three months ended June 2010 and June 2009, respectively, and $636 million and $38 million for the six months ended June 2010 and June 2009, respectively, that have not been allocated to our segments. |
• | Financial Advisory. Financial Advisory includes advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense activities, restructurings and spin-offs. | |
• | Underwriting. Underwriting includes public offerings and private placements of a wide range of securities and other financial instruments. |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Financial Advisory
|
$ | 472 | $ | 368 | $ | 936 | $ | 895 | ||||||||
Equity underwriting
|
222 | 736 | 593 | 784 | ||||||||||||
Debt underwriting
|
223 | 336 | 572 | 584 | ||||||||||||
Total Underwriting
|
445 | 1,072 | 1,165 | 1,368 | ||||||||||||
Total net revenues
|
917 | 1,440 | 2,101 | 2,263 | ||||||||||||
Operating expenses
|
760 | 1,167 | 1,710 | 1,872 | ||||||||||||
Pre-tax
earnings
|
$ | 157 | $ | 273 | $ | 391 | $ | 391 | ||||||||
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Announced mergers and
acquisitions
(2)
|
$ | 98 | $ | 146 | $ | 244 | $ | 347 | ||||||||
Completed mergers and
acquisitions
(2)
|
77 | 163 | 192 | 356 | ||||||||||||
Equity and
equity-related
offerings
(3)
|
9 | 32 | 23 | 34 | ||||||||||||
Debt
offerings
(4)
|
46 | 79 | 106 | 148 |
(1) | Announced and completed mergers and acquisitions volumes are based on full credit to each of the advisors in a transaction. Equity and equity-related offerings and debt offerings are based on full credit for single book managers and equal credit for joint book managers. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal or a change in the value of a transaction. | |
(2) | Source: Dealogic. | |
(3) | Source: Thomson Reuters. Includes Rule 144A and public common stock offerings, convertible offerings and rights offerings. | |
(4) | Source: Thomson Reuters. Includes non-convertible preferred stock, mortgage-backed securities, asset-backed securities and taxable municipal debt. Includes publicly registered and Rule 144A issues. Excludes leveraged loans. |
• | FICC. We make markets in and trade interest rate and credit products, mortgage-related securities and loan products and other asset-backed instruments, currencies and commodities, structure and enter into a wide variety of derivative transactions, and engage in proprietary trading and investing. | |
• | Equities. We make markets in and trade equities and equity-related products, structure and enter into equity derivative transactions and engage in proprietary trading. We generate commissions from executing and clearing client transactions on major stock, options and futures exchanges worldwide through our Equities client franchise and clearing activities. We also engage in exchange-based market-making activities and in insurance activities. | |
• | Principal Investments. We make real estate and corporate principal investments, including our investment in the ordinary shares of ICBC. We generate net revenues from returns on these investments and from the increased share of the income and gains derived from our merchant banking funds when the return on a fund’s investments over the life of the fund exceeds certain threshold returns (typically referred to as an override). |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
FICC
|
$ | 4,396 | $ | 6,795 | $ | 11,782 | $ | 13,352 | ||||||||
Equities trading
|
235 | 2,157 | 1,708 | 3,184 | ||||||||||||
Equities commissions
|
977 | 1,021 | 1,858 | 1,995 | ||||||||||||
Total Equities
|
1,212 | 3,178 | 3,566 | 5,179 | ||||||||||||
ICBC
|
905 | 948 | 683 | 797 | ||||||||||||
Gross gains
|
1,198 | 1,306 | 2,046 | 1,812 | ||||||||||||
Gross losses
|
(1,174 | ) | (1,462 | ) | (1,296 | ) | (3,229 | ) | ||||||||
Net other corporate and real estate investments
|
24 | (156 | ) | 750 | (1,417 | ) | ||||||||||
Overrides
|
14 | 19 | 20 | 23 | ||||||||||||
Total Principal Investments
|
943 | 811 | 1,453 | (597 | ) | |||||||||||
Total net revenues
|
6,551 | 10,784 | 16,801 | 17,934 | ||||||||||||
Operating expenses
|
4,954 | 6,290 | 10,519 | 11,163 | ||||||||||||
Pre-tax
earnings
|
$ | 1,597 | $ | 4,494 | $ | 6,282 | $ | 6,771 | ||||||||
• | Asset Management. Asset Management provides investment and wealth advisory services and offers investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse group of institutions and individuals worldwide and primarily generates revenues in the form of management and incentive fees. | |
• | Securities Services. Securities Services provides prime brokerage services, financing services and securities lending services to institutional clients, including hedge funds, mutual funds, pension funds and foundations, and to high-net-worth individuals worldwide, and generates revenues primarily in the form of interest rate spreads or fees. |
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Management and other fees
|
$ | 957 | $ | 918 | $ | 1,883 | $ | 1,849 | ||||||||
Incentive fees
|
19 | 4 | 39 | 22 | ||||||||||||
Total Asset Management
|
976 | 922 | 1,922 | 1,871 | ||||||||||||
Securities Services
|
397 | 615 | 792 | 1,118 | ||||||||||||
Total net revenues
|
1,373 | 1,537 | 2,714 | 2,989 | ||||||||||||
Operating expenses
|
1,064 | 1,250 | 2,144 | 2,455 | ||||||||||||
Pre-tax
earnings
|
$ | 309 | $ | 287 | $ | 570 | $ | 534 | ||||||||
• | assets in brokerage accounts that generate commissions, mark-ups and spreads based on transactional activity; | |
• | our own investments in funds that we manage; or | |
• | interest-bearing deposits held through our bank depository institution subsidiaries. |
As of | ||||||||||||||||
June 30, | December 31, | November 30, | ||||||||||||||
2010 | 2009 | 2009 | 2008 | |||||||||||||
Alternative
investments
(1)
|
$ | 146 | $ | 142 | $ | 146 | $ | 146 | ||||||||
Equity
|
125 | 121 | 146 | 112 | ||||||||||||
Fixed income
|
326 | 272 | 315 | 248 | ||||||||||||
Total
non-money
market assets
|
597 | 535 | 607 | 506 | ||||||||||||
Money markets
|
205 | 284 | 264 | 273 | ||||||||||||
Total assets under management
|
$ | 802 | $ | 819 | $ | 871 | $ | 779 | ||||||||
(1) | Primarily includes hedge funds, private equity, real estate, currencies, commodities and asset allocation strategies. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Balance, beginning of period
|
$ | 840 | $ | 771 | $ | 871 | $ | 798 | ||||||||
Net inflows/(outflows)
|
||||||||||||||||
Alternative investments
|
1 | (2 | ) | 2 | (4 | ) | ||||||||||
Equity
|
(9 | ) | (1 | ) | (11 | ) | (2 | ) | ||||||||
Fixed income
|
(2 | ) | 6 | 5 | 3 | |||||||||||
Total
non-money
market net inflows/(outflows)
|
(10 | ) | 3 | (4 | ) | (3 | ) | |||||||||
Money markets
|
(14 | ) | 3 | (59 | ) | (2 | ) | |||||||||
Total net inflows/(outflows)
|
(24 | ) | 6 | (63 | ) | (5 | ) | |||||||||
Net market appreciation/(depreciation)
|
(14 | ) | 42 | (6 | ) | 26 | ||||||||||
Balance, end of period
|
$ | 802 | $ | 819 | $ | 802 | $ | 819 | ||||||||
Type of Off-Balance-Sheet Arrangement | Disclosure in Quarterly Report on Form 10-Q | |
Variable interests and other obligations, including contingent obligations, arising from variable interests in nonconsolidated VIEs | See Note 4 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. | |
Leases, letters of credit, and loans and other commitments | See Note 8 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. | |
Guarantees | See Note 8 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. | |
Derivative contracts | See Notes 3 and 7 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, “— Critical Accounting Policies” above and “— Derivatives” below. | |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
($ in millions) | ||||||||
Tier 1 Capital
|
||||||||
Common shareholders’ equity
|
$ | 66,862 | $ | 63,757 | ||||
Preferred stock
|
6,957 | 6,957 | ||||||
Junior subordinated debt issued to trusts
|
5,000 | 5,000 | ||||||
Less: Goodwill
|
(3,548 | ) | (3,543 | ) | ||||
Less: Disallowable intangible assets
|
(2,346 | ) | (1,377 | ) | ||||
Less: Other
deductions
(1)
|
(4,441 | ) | (6,152 | ) | ||||
Tier 1 Capital
|
68,484 | 64,642 | ||||||
Tier 2 Capital
|
||||||||
Qualifying subordinated
debt
(2)
|
13,680 | 14,004 | ||||||
Less: Other
deductions
(1)
|
(231 | ) | (176 | ) | ||||
Tier 2 Capital
|
$ | 13,449 | $ | 13,828 | ||||
Total Capital
|
$ | 81,933 | $ | 78,470 | ||||
Risk-Weighted
Assets
|
$ | 451,247 | $ | 431,890 | ||||
Tier 1 Capital Ratio
|
15.2 | % | 15.0 | % | ||||
Total Capital Ratio
|
18.2 | % | 18.2 | % | ||||
Tier 1 Leverage Ratio
|
8.0 | % | 7.6 | % |
(1) | Principally includes equity investments in non-financial companies and the cumulative change in the fair value of our unsecured borrowings attributable to the impact of changes in our own credit spreads, disallowed deferred tax assets, and investments in certain nonconsolidated entities. | |
(2) | Substantially all of our subordinated debt qualifies as Tier 2 capital for Basel I purposes. |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
($ in millions, except
|
||||||||
per share amounts) | ||||||||
Total assets
|
$ | 883,188 | $ | 848,942 | ||||
Adjusted
assets
(1)
|
551,117 | 546,151 | ||||||
Total shareholders’ equity
|
73,819 | 70,714 | ||||||
Tangible equity
capital
(2)
|
72,925 | 70,794 | ||||||
Leverage
ratio
(3)
|
12.0 | x | 12.0 | x | ||||
Adjusted leverage
ratio
(4)
|
7.6 | x | 7.7 | x | ||||
Debt to equity
ratio
(5)
|
2.4 | x | 2.6 | x | ||||
Common shareholders’ equity
|
$ | 66,862 | $ | 63,757 | ||||
Tangible common shareholders’
equity
(6)
|
60,968 | 58,837 | ||||||
Book value per common
share
(7)
|
123.73 | 117.48 | ||||||
Tangible book value per common
share
(6)(7)
|
112.82 | 108.42 | ||||||
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
Basel I (8) | ||||||||
Tier 1 capital ratio
|
15.2 | % | 15.0 | % | ||||
Total capital ratio
|
18.2 | % | 18.2 | % | ||||
Tier 1 leverage ratio
|
8.0 | % | 7.6 | % | ||||
Tier 1 common
ratio
(9)
|
12.5 | % | 12.2 | % | ||||
Tangible common shareholders’
equity
(6)
to
risk-weighted
assets ratio
|
13.5 | % | 13.6 | % |
(1) | Adjusted assets excludes (i) low-risk collateralized assets generally associated with our matched book and securities lending businesses and federal funds sold, (ii) cash and securities we segregate for regulatory and other purposes and (iii) goodwill and identifiable intangible assets which are deducted when calculating tangible equity capital (see footnote 2 below). |
As of | ||||||||||
June
|
December
|
|||||||||
2010 | 2009 | |||||||||
(in millions) | ||||||||||
Total assets
|
$ | 883,188 | $ | 848,942 | ||||||
Deduct:
|
Securities borrowed | (190,079 | ) | (189,939 | ) | |||||
Securities purchased under agreements to resell and federal funds sold | (169,280 | ) | (144,279 | ) | ||||||
Add:
|
Trading liabilities, at fair value | 147,170 | 129,019 | |||||||
Less derivative liabilities | (57,574 | ) | (56,009 | ) | ||||||
Subtotal | 89,596 | 73,010 | ||||||||
Deduct:
|
Cash and securities segregated for regulatory and other purposes | (56,414 | ) | (36,663 | ) | |||||
Goodwill and identifiable intangible assets | (5,894 | ) | (4,920 | ) | ||||||
Adjusted assets
|
$ | 551,117 | $ | 546,151 | ||||||
(2) | Tangible equity capital equals total shareholders’ equity and junior subordinated debt issued to trusts less goodwill and identifiable intangible assets. We consider junior subordinated debt issued to trusts to be a component of our tangible equity capital base due to certain characteristics of the debt, including its long-term nature, our ability to defer payments due on the debt and the subordinated nature of the debt in our capital structure. |
As of | ||||||||||
June
|
December
|
|||||||||
2010 | 2009 | |||||||||
(in millions) | ||||||||||
Total shareholders’ equity
|
$ | 73,819 | $ | 70,714 | ||||||
Add:
|
Junior subordinated debt issued to trusts | 5,000 | 5,000 | |||||||
Deduct:
|
Goodwill and identifiable intangible assets | (5,894 | ) | (4,920 | ) | |||||
Tangible equity capital
|
$ | 72,925 | $ | 70,794 | ||||||
(3) | The leverage ratio equals total assets divided by total shareholders’ equity. This ratio is different from the Tier 1 leverage ratio included above, which is described in Note 15 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. | |
(4) | The adjusted leverage ratio equals adjusted assets divided by tangible equity capital. We believe that the adjusted leverage ratio is a more meaningful measure of our capital adequacy than the leverage ratio because it excludes certain low-risk collateralized assets that are generally supported with little or no capital and reflects the tangible equity capital deployed in our businesses. | |
(5) | The debt to equity ratio equals unsecured long-term borrowings divided by total shareholders’ equity. | |
(6) | Tangible common shareholders’ equity equals total shareholders’ equity less preferred stock, goodwill and identifiable intangible assets. Tangible book value per common share is computed by dividing tangible common shareholders’ equity by the number of common shares outstanding, including RSUs granted to employees with no future service requirements. We believe that tangible common shareholders’ equity and tangible book value per common share are meaningful because they are measures that we and investors use to assess capital adequacy. |
As of | ||||||||||
June
|
December
|
|||||||||
2010 | 2009 | |||||||||
(in millions) | ||||||||||
Total shareholders’ equity
|
$ | 73,819 | $ | 70,714 | ||||||
Deduct:
|
Preferred stock | (6,957 | ) | (6,957 | ) | |||||
Common shareholders’ equity
|
66,862 | 63,757 | ||||||||
Deduct:
|
Goodwill and identifiable intangible assets | (5,894 | ) | (4,920 | ) | |||||
Tangible common shareholders’ equity
|
$ | 60,968 | $ | 58,837 | ||||||
(7) | Book value and tangible book value per common share are based on common shares outstanding, including RSUs granted to employees with no future service requirements, of 540.4 million and 542.7 million as of June 2010 and December 2009, respectively. | |
(8) | Calculated in accordance with the regulatory capital requirements currently applicable to bank holding companies. RWAs were $451.25 billion and $431.89 billion as of June 2010 and December 2009, respectively, under Basel I. See Note 15 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information regarding our regulatory capital ratios. | |
(9) | The Tier 1 common ratio equals Tier 1 capital less preferred stock and junior subordinated debt issued to trusts, divided by RWAs. We believe that the Tier 1 common ratio is meaningful because it is one of the measures that we and investors use to assess capital adequacy. |
As of | ||||||||||
June
|
December
|
|||||||||
2010 | 2009 | |||||||||
(in millions) | ||||||||||
Tier 1 capital
|
$ | 68,484 | $ | 64,642 | ||||||
Deduct:
|
Preferred stock | (6,957 | ) | (6,957 | ) | |||||
Junior subordinated debt issued to trusts | (5,000 | ) | (5,000 | ) | ||||||
Tier 1 common capital
|
$ | 56,527 | $ | 52,685 | ||||||
Remainder
|
2011-
|
2013-
|
2015-
|
|||||||||||||||||
of 2010 | 2012 | 2014 | Thereafter | Total | ||||||||||||||||
Unsecured
long-term
borrowings
(1)(2)(3)
|
$ | — | $ | 37,261 | $ | 39,296 | $ | 102,025 | $ | 178,582 | ||||||||||
Secured
long-term
financings
(1)(2)(4)
|
— | 6,425 | 3,321 | 2,656 | 12,402 | |||||||||||||||
Time
deposits
(5)
|
— | 1,992 | 2,470 | 2,253 | 6,715 | |||||||||||||||
Contractual interest
payments
(6)
|
3,392 | 12,686 | 9,704 | 29,710 | 55,492 | |||||||||||||||
Insurance
liabilities
(7)
|
350 | 1,268 | 1,090 | 8,415 | 11,123 | |||||||||||||||
Minimum rental payments
|
248 | 851 | 521 | 1,673 | 3,293 | |||||||||||||||
Purchase obligations
|
155 | 60 | 41 | 31 | 287 |
(1) | Obligations maturing within one year of our financial statement date or redeemable within one year of our financial statement date at the option of the holder are excluded from this table and are treated as short-term obligations. See Note 3 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information regarding our secured financings. | |
(2) | Obligations that are repayable prior to maturity at the option of Goldman Sachs are reflected at their contractual maturity dates. Obligations that are redeemable prior to maturity at the option of the holder are reflected at the dates such options become exercisable. | |
(3) | Amount includes an increase of $11.53 billion to the carrying amount of certain of the firm’s unsecured long-term borrowings related to fair value hedges. In addition, the aggregate contractual principal amount of unsecured long-term borrowings (principal and non-principal protected) for which the fair value option was elected exceeded the related fair value by $936 million. | |
(4) | The aggregate contractual principal amount of secured long-term financings for which the fair value option was elected, primarily consisting of transfers of financial assets accounted for as financings rather than sales, debt raised through our William Street credit extension program and certain other nonrecourse financings, exceeded the related fair value by $725 million. | |
(5) | Excludes $3.20 billion of time deposits maturing within one year of our financial statement date. | |
(6) | Represents estimated future interest payments related to unsecured long-term borrowings, secured long-term financings and time deposits based on applicable interest rates as of June 2010. Includes stated coupons, if any, on structured notes. | |
(7) | Represents estimated undiscounted payments related to future benefits and unpaid claims arising from policies associated with our insurance activities, excluding separate accounts and estimated recoveries under reinsurance contracts. |
• | Interest rate risks primarily result from exposures to changes in the level, slope and curvature of the yield curve, the volatility of interest rates, mortgage prepayment speeds and credit spreads. | |
• | Equity price risks result from exposures to changes in prices and volatilities of individual equities, equity baskets and equity indices. | |
• | Currency rate risks result from exposures to changes in spot prices, forward prices and volatilities of currency rates. | |
• | Commodity price risks result from exposures to changes in spot prices, forward prices and volatilities of commodities, such as electricity, natural gas, crude oil, petroleum products, and precious and base metals. |
• | risk limits based on a summary measure of market risk exposure referred to as VaR; | |
• | scenario analyses, stress tests and other analytical tools that measure the potential effects on our trading net revenues of various market events, including, but not limited to, a large widening of credit spreads, a substantial decline in equity markets and significant moves in selected emerging markets; and | |
• | inventory position limits for selected business units. |
Average for the | ||||||||||||||||
Three Months
|
Six Months
|
|||||||||||||||
Ended June | Ended June | |||||||||||||||
Risk Categories | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Interest rates
|
$ | 87 | $ | 205 | $ | 98 | $ | 211 | ||||||||
Equity prices
|
61 | 60 | 74 | 49 | ||||||||||||
Currency rates
|
36 | 39 | 36 | 38 | ||||||||||||
Commodity prices
|
32 | 40 | 40 | 40 | ||||||||||||
Diversification
effect
(2)
|
(80 | ) | (99 | ) | (100 | ) | (95 | ) | ||||||||
Total
|
$ | 136 | $ | 245 | $ | 148 | $ | 243 | ||||||||
(1) | Certain portfolios and individual positions are not included in VaR, where VaR is not the most appropriate measure of risk (e.g., due to transfer restrictions and/or illiquidity). See “— Other Market Risk Measures” below. | |
(2) | Equals the difference between total VaR and the sum of the VaRs for the four risk categories. This effect arises because the four market risk categories are not perfectly correlated. |
As of |
Three Months Ended
|
|||||||||||||||
June
|
March
|
June 2010 | ||||||||||||||
Risk Categories | 2010 | 2010 | High | Low | ||||||||||||
Interest rates
|
$ | 96 | $ | 90 | $ | 96 | $ | 76 | ||||||||
Equity prices
|
50 | 93 | 108 | 39 | ||||||||||||
Currency rates
|
30 | 57 | 56 | 22 | ||||||||||||
Commodity prices
|
29 | 35 | 42 | 23 | ||||||||||||
Diversification
effect
(2)
|
(67 | ) | (111 | ) | ||||||||||||
Total
|
$ | 138 | $ | 164 | $ | 174 | $ | 109 | ||||||||
(1) | Certain portfolios and individual positions are not included in VaR, where VaR is not the most appropriate measure of risk (e.g., due to transfer restrictions and/or illiquidity). See “— Other Market Risk Measures” below. | |
(2) | Equals the difference between total VaR and the sum of the VaRs for the four risk categories. This effect arises because the four market risk categories are not perfectly correlated. |
Asset Categories | 10% Sensitivity Measure | 10% Sensitivity | ||||||||
Amount as of | ||||||||||
June 2010 | March 2010 | |||||||||
(in millions) | ||||||||||
FICC and Equities
(1)
|
||||||||||
Equity
(2)
|
Underlying asset value | $ | 543 | $ | 548 | |||||
Debt
(3)
|
Underlying asset value | 368 | 375 | |||||||
Principal Investments
(4)
|
||||||||||
ICBC
|
ICBC ordinary share price | 359 | 277 | |||||||
Other
Equity
(5)
|
Underlying asset value | 1,006 | 954 | |||||||
Debt
(6)
|
Underlying asset value | 928 | 972 | |||||||
Real
Estate
(7)
|
Underlying asset value | 684 | 675 |
(1) | In addition to the positions in these portfolios, which are accounted for at fair value, we make investments accounted for under the equity method and we also make direct investments in real estate, both of which are included in “Other assets” in the condensed consolidated statements of financial condition. Direct investments in real estate are accounted for at cost less accumulated depreciation. See Note 12 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on “Other assets.” | |
(2) | Relates to private and restricted public equity securities held within the FICC and Equities components of our Trading and Principal Investments segment. | |
(3) | Primarily relates to acquired portfolios of distressed loans (primarily backed by commercial and residential real estate collateral), loans backed by commercial real estate, and corporate debt held within the FICC component of our Trading and Principal Investments segment. | |
(4) | Represents investments included within the Principal Investments component of our Trading and Principal Investments segment. | |
(5) | Primarily relates to interests in our merchant banking funds that invest in corporate equities. | |
(6) | Primarily relates to interests in our merchant banking funds that invest in corporate mezzanine debt instruments. | |
(7) | Primarily relates to interests in our merchant banking funds that invest in real estate. The assets in which these funds invest are typically leveraged. This sensitivity measure is based on our percentage ownership of the underlying asset values in the funds. |
Assets | As of June 2010 | |||||||||||||||||||
0 - 12
|
1 - 5
|
5 - 10
|
10 Years
|
|||||||||||||||||
Product Type | Months | Years | Years | or Greater | Total | |||||||||||||||
Interest rates
|
$ | 10,294 | $ | 37,372 | $ | 29,982 | $ | 46,341 | $ | 123,989 | ||||||||||
Credit
|
3,373 | 19,569 | 9,704 | 6,272 | 38,918 | |||||||||||||||
Currencies
|
13,073 | 10,549 | 5,035 | 7,512 | 36,169 | |||||||||||||||
Commodities
|
5,055 | 5,745 | 418 | 38 | 11,256 | |||||||||||||||
Equities
|
4,012 | 8,732 | 5,471 | 2,399 | 20,614 | |||||||||||||||
Netting across product
types
(1)
|
(3,155 | ) | (5,755 | ) | (4,461 | ) | (2,213 | ) | (15,584 | ) | ||||||||||
Subtotal
|
$ | 32,652 | (4) | $ | 76,212 | $ | 46,149 | $ | 60,349 | $ | 215,362 | |||||||||
Cross maturity
netting
(2)
|
(28,315 | ) | ||||||||||||||||||
Cash collateral
netting
(3)
|
(113,764 | ) | ||||||||||||||||||
Total
|
$ | 73,283 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||
0 - 12
|
1 - 5
|
5 - 10
|
10 Years
|
|||||||||||||||||
Product Type | Months | Years | Years | or Greater | Total | |||||||||||||||
Interest rates
|
$ | 6,714 | $ | 13,850 | $ | 15,210 | $ | 18,337 | $ | 54,111 | ||||||||||
Credit
|
968 | 6,123 | 2,493 | 2,076 | 11,660 | |||||||||||||||
Currencies
|
11,608 | 7,417 | 3,508 | 3,615 | 26,148 | |||||||||||||||
Commodities
|
4,147 | 6,613 | 893 | 1,047 | 12,700 | |||||||||||||||
Equities
|
4,115 | 3,738 | 3,557 | 641 | 12,051 | |||||||||||||||
Netting across product
types
(1)
|
(3,155 | ) | (5,755 | ) | (4,461 | ) | (2,213 | ) | (15,584 | ) | ||||||||||
Subtotal
|
$ | 24,397 | (4) | $ | 31,986 | $ | 21,200 | $ | 23,503 | $ | 101,086 | |||||||||
Cross maturity
netting
(2)
|
(28,315 | ) | ||||||||||||||||||
Cash collateral
netting
(3)
|
(17,650 | ) | ||||||||||||||||||
Total
|
$ | 55,121 | ||||||||||||||||||
(1) | Represents the netting of receivable balances with payable balances for the same counterparty across product types within a tenor category, pursuant to enforceable netting agreements. Receivable and payable balances with the same counterparty in the same product type and tenor category are netted within such product type and tenor category, where appropriate. | |
(2) | Represents the netting of receivable balances with payable balances for the same counterparty across tenor categories, pursuant to enforceable netting agreements. | |
(3) | Represents the netting of cash collateral received and posted on a counterparty basis pursuant to credit support agreements. | |
(4) | Includes fair values of OTC derivative assets and liabilities, maturing within six months, of $23.66 billion and $18.73 billion, respectively. |
Assets | As of December 2009 | |||||||||||||||||||
0 - 12
|
1 - 5
|
5 - 10
|
10 Years
|
|||||||||||||||||
Product Type | Months | Years | Years | or Greater | Total | |||||||||||||||
Interest rates
|
$ | 14,266 | $ | 37,146 | $ | 25,608 | $ | 37,721 | $ | 114,741 | ||||||||||
Credit
|
5,743 | 20,465 | 11,497 | 6,281 | 43,986 | |||||||||||||||
Currencies
|
9,870 | 12,789 | 6,408 | 6,955 | 36,022 | |||||||||||||||
Commodities
|
6,201 | 7,546 | 521 | 41 | 14,309 | |||||||||||||||
Equities
|
6,742 | 8,818 | 4,920 | 2,350 | 22,830 | |||||||||||||||
Netting across product
types
(1)
|
(3,480 | ) | (6,256 | ) | (3,047 | ) | (1,399 | ) | (14,182 | ) | ||||||||||
Subtotal
|
$ | 39,342 | (4) | $ | 80,508 | $ | 45,907 | $ | 51,949 | $ | 217,706 | |||||||||
Cross maturity
netting
(2)
|
(24,681 | ) | ||||||||||||||||||
Cash collateral
netting
(3)
|
(124,603 | ) | ||||||||||||||||||
Total
|
$ | 68,422 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||
0 - 12
|
1 - 5
|
5 - 10
|
10 Years
|
|||||||||||||||||
Product Type | Months | Years | Years | or Greater | Total | |||||||||||||||
Interest rates
|
$ | 7,042 | $ | 12,831 | $ | 11,421 | $ | 12,518 | $ | 43,812 | ||||||||||
Credit
|
2,487 | 7,168 | 2,356 | 2,116 | 14,127 | |||||||||||||||
Currencies
|
12,202 | 4,003 | 2,789 | 2,132 | 21,126 | |||||||||||||||
Commodities
|
6,922 | 7,161 | 1,157 | 846 | 16,086 | |||||||||||||||
Equities
|
4,213 | 3,746 | 3,371 | 586 | 11,916 | |||||||||||||||
Netting across product
types
(1)
|
(3,480 | ) | (6,256 | ) | (3,047 | ) | (1,399 | ) | (14,182 | ) | ||||||||||
Subtotal
|
$ | 29,386 | (4) | $ | 28,653 | $ | 18,047 | $ | 16,799 | $ | 92,885 | |||||||||
Cross maturity
netting
(2)
|
(24,681 | ) | ||||||||||||||||||
Cash collateral
netting
(3)
|
(14,743 | ) | ||||||||||||||||||
Total
|
$ | 53,461 | ||||||||||||||||||
(1) | Represents the netting of receivable balances with payable balances for the same counterparty across product types within a tenor category, pursuant to enforceable netting agreements. Receivable and payable balances with the same counterparty in the same product type and tenor category are netted within such product type and tenor category, where appropriate. | |
(2) | Represents the netting of receivable balances with payable balances for the same counterparty across tenor categories, pursuant to enforceable netting agreements. | |
(3) | Represents the netting of cash collateral received and posted on a counterparty basis pursuant to credit support agreements. | |
(4) | Includes fair values of OTC derivative assets and liabilities, maturing within six months, of $21.60 billion and $18.08 billion, respectively. |
As of June 2010 | ||||||||||||||||||||||||||||||||
Exposure
|
||||||||||||||||||||||||||||||||
Credit Rating
|
0 - 12
|
1 - 5
|
5 - 10
|
10 Years
|
Net of
|
|||||||||||||||||||||||||||
Equivalent | Months | Years | Years | or Greater | Total | Netting (2) | Exposure | Collateral | ||||||||||||||||||||||||
AAA/Aaa
|
$ | 1,090 | $ | 971 | $ | 976 | $ | 2,145 | $ | 5,182 | $ | (991 | ) | $ | 4,191 | $ | 3,546 | |||||||||||||||
AA/Aa2
|
5,439 | 11,505 | 9,229 | 12,228 | 38,401 | (24,920 | ) | 13,481 | 9,521 | |||||||||||||||||||||||
A/A2
|
16,766 | 39,551 | 28,036 | 28,333 | 112,686 | (83,255 | ) | 29,431 | 18,814 | |||||||||||||||||||||||
BBB/Baa2
|
5,300 | 17,418 | 5,451 | 15,333 | 43,502 | (27,904 | ) | 15,598 | 7,641 | |||||||||||||||||||||||
BB/Ba2 or lower
|
3,142 | 5,671 | 2,208 | 2,114 | 13,135 | (4,940 | ) | 8,195 | 5,312 | |||||||||||||||||||||||
Unrated
|
915 | 1,096 | 249 | 196 | 2,456 | (69 | ) | 2,387 | 1,753 | |||||||||||||||||||||||
Total
|
$ | 32,652 | (1) | $ | 76,212 | $ | 46,149 | $ | 60,349 | $ | 215,362 | $ | (142,079 | ) | $ | 73,283 | $ | 46,587 | ||||||||||||||
As of December 2009 | ||||||||||||||||||||||||||||||||
Exposure
|
||||||||||||||||||||||||||||||||
Credit Rating
|
0 - 12
|
1 - 5
|
5 - 10
|
10 Years
|
Net of
|
|||||||||||||||||||||||||||
Equivalent | Months | Years | Years | or Greater | Total | Netting (2) | Exposure | Collateral | ||||||||||||||||||||||||
AAA/Aaa
|
$ | 2,020 | $ | 3,157 | $ | 3,507 | $ | 2,567 | $ | 11,251 | $ | (5,603 | ) | $ | 5,648 | $ | 5,109 | |||||||||||||||
AA/Aa2
|
5,285 | 10,745 | 7,090 | 8,954 | 32,074 | (19,653 | ) | 12,421 | 8,735 | |||||||||||||||||||||||
A/A2
|
22,707 | 47,891 | 30,267 | 31,203 | 132,068 | (107,942 | ) | 24,126 | 20,111 | |||||||||||||||||||||||
BBB/Baa2
|
4,402 | 8,300 | 3,024 | 7,830 | 23,556 | (11,064 | ) | 12,492 | 6,202 | |||||||||||||||||||||||
BB/Ba2 or lower
|
4,444 | 9,438 | 1,735 | 1,354 | 16,971 | (4,914 | ) | 12,057 | 7,381 | |||||||||||||||||||||||
Unrated
|
484 | 977 | 284 | 41 | 1,786 | (108 | ) | 1,678 | 1,161 | |||||||||||||||||||||||
Total
|
$ | 39,342 | (1) | $ | 80,508 | $ | 45,907 | $ | 51,949 | $ | 217,706 | $ | (149,284 | ) | $ | 68,422 | $ | 48,699 | ||||||||||||||
(1) | Includes fair values of OTC derivative assets, maturing within six months, of $23.66 billion and $21.60 billion as of June 2010 and December 2009, respectively. |
(2) | Represents the netting of receivable balances with payable balances for the same counterparty across tenor categories, pursuant to enforceable netting agreements, and the netting of cash collateral received, pursuant to credit support agreements. Receivable and payable balances with the same counterparty in the same tenor category are netted within such tenor category, where appropriate. |
• | Excess Liquidity. We maintain substantial excess liquidity to meet a broad range of potential cash outflows and collateral needs in a stressed environment, including financing obligations. The amount of our excess liquidity is based on an internal liquidity model together with a qualitative assessment of the condition of the financial markets and of Goldman Sachs. | |
• | Asset-Liability Management. Our funding strategy includes an assessment of the overall characteristics of our assets with respect to their anticipated holding periods and potential illiquidity in a stressed environment. In addition, we manage the maturities and diversity of our secured and unsecured funding liabilities across markets, products and counterparties, and we seek to maintain liabilities of appropriate term relative to our asset base. | |
• | Contingency Funding Plan (CFP). We maintain a CFP to help identify, measure, monitor and mitigate liquidity and funding risk. The CFP considers various risk factors that could occur during a crisis and provides a framework for analyzing and responding to a liquidity crisis. |
• | The first days or weeks of a liquidity crisis are the most critical to a company’s survival. | |
• | Focus must be maintained on all potential cash and collateral outflows, not just disruptions to financing flows. Our businesses are diverse, and our cash needs are driven by many factors, including market movements, collateral requirements and client commitments, all of which can change dramatically in a difficult funding environment. | |
• | During a liquidity crisis, credit-sensitive funding, including unsecured debt and some types of secured financing agreements, may be unavailable, and the terms or availability of other types of secured financing may change. | |
• | As a result of our policy to pre-fund liquidity that we estimate may be needed in a crisis, we hold more unencumbered securities and have larger debt balances than our businesses would otherwise require. We believe that our liquidity is stronger with greater balances of highly liquid unencumbered securities, even though it increases our total assets, and our funding costs. |
• | upcoming maturities of unsecured long-term debt, promissory notes, commercial paper, term deposits and other unsecured funding products; | |
• | potential buybacks of a portion of our outstanding unsecured funding; | |
• | potential withdrawals of client deposits in our banking entities; | |
• | adverse changes in the terms of, or the inability to refinance, secured funding trades with upcoming maturities, reflecting, among other factors, the quality of the underlying collateral and counterparty concentration; | |
• | outflows of cash or collateral associated with the impact of market moves on our OTC derivatives, listed derivatives and securities and loans pledged as collateral for financing transactions; | |
• | other outflows of cash or collateral related to derivatives, including the impact of trade terminations, collateral substitutions, collateral disputes, collateral calls or termination payments (in the event of a two-notch downgrade in our credit ratings), collateral that has not been called by counterparties but is available to them, or additional margin that could be requested by exchanges or clearing houses in a stressed environment; | |
• | potential liquidity outflows associated with our prime brokerage business, including those related to customer credit balances; | |
• | draws on our unfunded commitments not supported by William Street Funding Corporation (1) , with draw assumptions varying in magnitude reflecting, among other things, the type of commitment and counterparty; and |
• | other upcoming cash outflows, such as tax and other large payments. |
Three Months
|
Year Ended
|
|||||||
Ended June | December | |||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
U.S. dollar-denominated
|
$ | 123,147 | $ | 120,970 | ||||
Non-U.S. dollar-denominated
|
39,374 | 45,404 | ||||||
Total Global Core Excess
|
$ | 162,521 | $ | 166,374 | ||||
Three Months
|
Year Ended
|
|||||||
Ended June | December | |||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Overnight cash deposits
|
$ | 20,728 | $ | 21,341 | ||||
Federal funds sold
|
193 | 374 | ||||||
U.S. government obligations
|
101,498 | 85,702 | ||||||
U.S. agency obligations and highly liquid U.S. agency
mortgage-backed
obligations
|
1,757 | 15,108 | ||||||
French, German, United Kingdom and Japanese government
obligations
|
38,345 | 43,849 | ||||||
Total
|
$ | 162,521 | $ | 166,374 | ||||
Average for the | ||||||||
Three Months
|
Year Ended
|
|||||||
Ended June | December | |||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Group Inc.
|
$ | 54,547 | $ | 54,660 | ||||
Major
broker-dealer
subsidiaries
|
65,425 | 70,526 | ||||||
Bank subsidiaries
|
42,549 | 41,188 | ||||||
Total
|
$ | 162,521 | $ | 166,374 | ||||
• | Term Structure. We seek to structure our liabilities to have long-dated maturities in order to reduce refinancing risk. We manage maturity concentrations for both secured and unsecured funding to ensure we are able to mitigate any concentrated funding outflows. | |
• | Diversity of Funding Sources. We seek to maintain broad and diversified funding sources globally for both secured and unsecured funding. We make use of the repurchase agreement and securities lending markets, as well as other secured funding markets. We issue long-term debt through syndicated U.S. registered offerings, U.S. registered and 144A medium-term note programs, offshore medium-term note offerings and other debt offerings. We issue short-term debt through U.S. and non-U.S. commercial paper and promissory note issuances and other methods. We raise demand and savings deposits through cash sweep programs and time deposits through internal and third-party broker networks. We generally distribute our funding products through our own sales force to a large, diverse global creditor base. We believe that our relationships with our creditors are critical to our liquidity. Our creditors include banks, governments, securities lenders, pension funds, insurance companies, mutual funds and individuals. We access funding in a variety of markets in the Americas, Europe and Asia. We have imposed various internal guidelines on creditor concentration, including the amount of our commercial paper and promissory notes that can be owned by any single creditor or group of creditors. | |
• | Structural Protection. We structure our liabilities to reduce the risk that we may be required to redeem or repurchase certain of our borrowings prior to their contractual maturity. We issue substantially all of our unsecured debt without put provisions or other provisions that would, based solely upon an adverse change in our credit ratings, financial ratios, earnings, cash flows or stock price, trigger a requirement for an early payment, collateral support, change in terms, acceleration of maturity or the creation of an additional financial obligation. |
• | the portion of trading assets that we believe could not be funded on a secured basis in periods of market stress, assuming stressed loan values; | |
• | goodwill and identifiable intangible assets, property, leasehold improvements and equipment, and other illiquid assets; | |
• | derivative and other margin and collateral requirements; | |
• | anticipated draws on our unfunded loan commitments; and | |
• | capital or other forms of financing in our regulated subsidiaries that are in excess of their long-term financing requirements. |
As of | ||||||||
June
|
December
|
|||||||
2010 | 2009 | |||||||
(in millions) | ||||||||
Mortgage and other
asset-backed
loans and securities
|
$ | 13,336 | $ | 14,277 | ||||
Bank loans and bridge
loans
(1)
|
17,776 | 19,345 | ||||||
Emerging market debt securities
|
3,065 | 2,957 | ||||||
High-yield
and other debt obligations
|
12,074 | 12,028 | ||||||
Private equity investments and real estate fund
investments
(2)
|
13,086 | 14,633 | ||||||
Emerging market equity securities
|
3,589 | 5,193 | ||||||
ICBC ordinary
shares
(3)
|
9,683 | 8,111 | ||||||
SMFG convertible preferred
stock
(4)
|
— | 933 | ||||||
Other restricted public equity securities
|
92 | 203 | ||||||
Other investments in
funds
(5)
|
2,991 | 2,911 |
(1) | Includes funded commitments and inventory held in connection with our origination and secondary trading activities. | |
(2) | Includes interests in our merchant banking funds. Such amounts exclude assets related to consolidated investment funds of $911 million and $919 million as of June 2010 and December 2009, respectively, for which Goldman Sachs does not bear economic exposure. Excludes $1.11 billion as of June 2010, related to VIEs consolidated upon adoption of ASU No. 2009-17, for which Goldman Sachs does not bear economic exposure. | |
(3) | Includes interests of $6.10 billion and $5.13 billion as of June 2010 and December 2009, respectively, held by investment funds managed by Goldman Sachs. | |
(4) | During the first quarter of 2010, we converted our remaining SMFG preferred stock investment into common stock and delivered the common stock to close out our remaining hedge position. | |
(5) | Includes interests in other investment funds that we manage. |
Short-Term
|
Long-Term
|
Subordinated
|
Trust
|
Preferred
|
Rating
|
|||||||
Debt | Debt | Debt | Preferred (1) | Stock (2) | Outlook | |||||||
DBRS, Inc.
|
R-1 (middle) | A (high) | A | A | BBB | Stable (5) | ||||||
Fitch,
Inc.
(3)
|
F1+ | A+ | A | A- | A- | Negative (6) | ||||||
Moody
’
s Investors
Service
(4)
|
P-1 | A1 | A2 | A3 | Baa2 | Negative (7) | ||||||
Standard & Poor
’
s Ratings Services
|
A-1 | A | A- | BBB | BBB | Negative (7) | ||||||
Rating and Investment Information, Inc.
|
a-1+ | AA- | A+ | Not Applicable | Not Applicable | Negative (8) |
(1) | Trust preferred securities issued by Goldman Sachs Capital I. | |
(2) | Includes Group Inc.’s non-cumulative preferred stock and the Normal Automatic Preferred Enhanced Capital Securities (APEX) issued by Goldman Sachs Capital II and Goldman Sachs Capital III. | |
(3) | GS Bank USA has been assigned a rating of AA- for long-term bank deposits, F1+ for short-term bank deposits and A+ for long-term issuer. | |
(4) | GS Bank USA has been assigned a rating of Aa3 for long-term bank deposits, P-1 for short-term bank deposits and Aa3 for long-term issuer. | |
(5) | Applies to long-term and short-term ratings. | |
(6) | Applies to long-term issuer default ratings. | |
(7) | Applies to long-term ratings. | |
(8) | Applies to issuer rating. |
Item 3: | Quantitative and Qualitative Disclosures About Market Risk |
Item 4: | Controls and Procedures |
Item 1: | Legal Proceedings |
Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds |
Total Number of
|
Maximum Number
|
|||||||||||||||
Average
|
Shares Purchased
|
of Shares That May
|
||||||||||||||
Total Number
|
Price
|
as Part of Publicly
|
Yet Be Purchased
|
|||||||||||||
of Shares
|
Paid per
|
Announced Plans
|
Under the Plans or
|
|||||||||||||
Period | Purchased | Share | or Programs (1) | Programs (1) | ||||||||||||
Month #1
(April 1, 2010 to April 30, 2010) |
— | — | — | 47,657,156 | ||||||||||||
Month #2
(May 1, 2010 to May 31, 2010) |
680 | $ | 140.30 | 680 | 47,656,476 | |||||||||||
Month #3
(June 1, 2010 to June 30, 2010) |
— | — | — | 47,656,476 | ||||||||||||
Total
|
680 | 680 | ||||||||||||||
(1) | On March 21, 2000, we announced that our Board had approved a repurchase program, pursuant to which up to 15 million shares of our common stock may be repurchased. This repurchase program was increased by an aggregate of 280 million shares by resolutions of our Board adopted on June 18, 2001, March 18, 2002, November 20, 2002, January 30, 2004, January 25, 2005, September 16, 2005, September 11, 2006 and December 17, 2007. We seek to use our share repurchase program to substantially offset increases in share count over time resulting from employee share-based compensation and to help maintain the appropriate level of common equity. The repurchase program is effected primarily through regular open-market purchases, the amounts and timing of which are determined primarily by our issuance of shares resulting from employee share-based compensation as well as our current and projected capital position (i.e., comparisons of our desired level of capital to our actual level of capital), but which may also be influenced by general market conditions and the prevailing price and trading volumes of our common stock. Any repurchase of our common stock requires approval by the Federal Reserve Board. The total remaining authorization under the repurchase program was 47,656,476 shares as of July 23, 2010; the repurchase program has no set expiration or termination date. |
Item 6: | Exhibits |
Exhibits: | ||||
3.1
|
Amended and Restated Certificate of Incorporation of The Goldman Sachs Group, Inc., amended as of May 7, 2010 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed May 11, 2010). | |||
3.2
|
Amended and Restated By-Laws of The Goldman Sachs Group, Inc., amended as of May 7, 2010 (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed May 11, 2010). | |||
10.1
|
Form of Deed of Gift. | |||
12.1
|
Statement re: Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends. | |||
15.1
|
Letter re: Unaudited Interim Financial Information. | |||
31.1
|
Rule 13a-14(a) Certifications.* | |||
32.1
|
Section 1350 Certifications.* | |||
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Statements of Earnings for the three and six months ended June 30, 2010 and June 26, 2009, (ii) the Condensed Consolidated Statements of Financial Condition as of June 30, 2010 and December 31, 2009, (iii) the Condensed Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2010 and year ended December 31, 2009, (iv) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and June 26, 2009, (v) the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2010 and June 26, 2009, and (vi) the notes to the Condensed Consolidated Financial Statements, tagged as blocks of text.* |
* | This information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934. |
By: |
/s/
David
A. Viniar
|
Title: | Chief Financial Officer |
By: |
/s/
Sarah
E. Smith
|
Title: | Principal Accounting Officer |
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
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DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
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No information found
No Customers Found
Price
Yield
Owner | Position | Direct Shares | Indirect Shares |
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