Goldman Sachs Reports First Quarter Record

Goldman Sachs Reports First Quarter Record Earnings Per Common Share of $6.67

The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of $12.73 billion and net earnings of $3.20 billion for its first quarter ended February 23, 2007. Diluted earnings per common share were $6.67 compared with $5.08 for the first quarter of 2006 and $6.59 for the fourth quarter of 2006. Annualized return on average tangible common shareholders’ equity (1) was 44.7% and annualized return on average common shareholders’ equity was 38.0% for the first quarter of 2007.
Business Highlights
Goldman Sachs generated record quarterly net revenues, net earnings and diluted earnings per common share.
Investment Banking produced record quarterly net revenues of $1.72 billion, including record results in Financial Advisory and Debt Underwriting.
The firm continued its leadership in worldwide mergers and acquisitions, ranking first in announced transactions for the fiscal year-to-date. (2)
Fixed Income, Currency and Commodities (FICC) generated record quarterly net revenues of $4.60 billion, reflecting strong performance across all major businesses.
Equities produced record quarterly net revenues of $3.09 billion, 26% higher than the previous record set in the first quarter of 2006, reflecting strength across all major businesses.
Asset Management generated net revenues of $1.07 billion, including record management and other fees of $982 million. Assets under management increased 26% from a year ago to a record $719 billion, with net asset inflows of $35 billion during the quarter.
————–

“We are very pleased with our first quarter’s results. They are a product of strong client activity across every region and every segment of our business,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “While market conditions will regularly shift, we are confident that our client-driven strategy will continue to produce the strongest results for the firm.”
Net Revenues

Investment Banking
——————

Net revenues in Investment Banking were $1.72 billion, 17% higher than the first quarter of 2006 and 28% higher than the fourth quarter of 2006. Net revenues in Financial Advisory were $861 million, 17% higher than the first quarter of 2006, primarily reflecting growth in industry-wide completed mergers and acquisitions. Net revenues in the firm’s Underwriting business were $855 million, 16% higher than the first quarter of 2006, reflecting significantly higher net revenues in debt underwriting, primarily due to an increase in leveraged finance activity, as the financing environment remained favorable. The firm’s investment banking backlog increased during the quarter. (3)
Trading and Principal Investments
———————————

Net revenues in Trading and Principal Investments were $9.42 billion, 35% higher than the first quarter of 2006 and 42% higher than the fourth quarter of 2006.

Net revenues in FICC were $4.60 billion, 20% higher than the first quarter of 2006, reflecting higher net revenues in credit products and mortgages. Net revenues in commodities and interest rate products were strong, but essentially unchanged from the same prior year period. Net revenues in currencies were also strong, but lower compared with the first quarter of 2006. During the quarter, FICC operated in an environment characterized by strong customer-driven activity and favorable market opportunities. In addition, although the subprime sector within the mortgage market experienced significant weakness, the broader credit environment remained strong.

Net revenues in Equities were $3.09 billion, 26% higher than the first quarter of 2006, primarily due to significantly higher net revenues in shares and principal strategies, reflecting strong results across all regions. Net revenues in derivatives were also strong, but essentially unchanged compared with the first quarter of 2006. During the quarter, Equities operated in an environment characterized by rising equity prices, strong customer-driven activity and favorable market opportunities.

Principal Investments recorded net revenues of $1.73 billion, reflecting gains and overrides from corporate and real estate principal investments, including a $227 million gain related to the firm’s investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC) and a $161 million gain related to the firm’s investment in the convertible preferred stock of Sumitomo Mitsui Financial Group, Inc. (SMFG). Net revenues in Principal Investments included approximately $500 million in gains in the first quarter of 2007 related to the firm’s adoption of SFAS No. 157.