16 Dec 2008, Peter Madigan, Risk magazine
The firm recorded net revenues of $22.22 billion for the year ending November 28, less than half of the $45.99 billion turnover posted in 2007. Earnings dropped even more precipitously to just $2.32 billion for 2008, down from $11.6 billion the previous year.
Income was down across most business lines, with fourth quarter investment banking revenues slumping 48% compared with the last three months of 2007 to $1.02 billion, and financial advisory turnover plunging 54% from the previous year to just $547 million.
The story was the same in fixed income, currency and commodities, with net revenue down 77% for the year to just $3.71 billion, incorporating a $3.1 billion loss related to non-investment-grade credit origination activities and losses from investments including corporate debt and public and private equities.
Impairments on mortgage-related business were on the same scale, with losses of $1.7 billion on residential mortgage loans and securities and losses of $1.4 billion on commercial mortgages loans and securities.
Asset management and securities services saw revenues climb 11% in the year to the end of November to $7.87 billion, although fourth quarter revenues slipped 5%. Assets under management decreased $89 billion over the course of the year due to market depreciation primarily in equity assets.
"Clearly 2008 represented one of the most difficult operating environments in modern financial history and certainly the most challenging year since we became a public company. Asset price declines, volatility and illiquidity were unprecedented across both equity and credit markets," said David Viniar, chief financial officer at Goldman Sachs, on an earnings call.
"In the first nine months of the year these stresses had a varied impact on our results...however, the significant magnitude of the stresses, and the fact that they occurred simultaneously, meant that they negatively impacted fourth quarter results," he added.
Compensation and benefit expenses fell 46% for the year, reflecting lower levels of discretionary compensation due to lower net revenues. Chief executive Lloyd Blankfein announced in November that he and six other senior officials - including Viniar - would forego their annual bonuses in light of the ongoing market crisis.
In 2007, Goldman Sachs awarded bonuses to the value of approximately $17 billion.