CORRECTED-TEXT-Fitch says Goldman's Q4 operating performance better-than-expected
(Corrects headline to Fitch not S&P) (The following statement was released by the rating agency) Jan 16 - Fourth-quarter 2012 (4Q'12) operating results for The Goldman Sachs Group, Inc. (Goldman) were better-than-expected, thanks to strengthening revenues combined with operating efficiency measures, according to Fitch Ratings. Other key financial characteristics were in line with Fitch's assumptions: notably conservative liquidity management and solid capital measures. These latest results have no rating implications. Revenues for the latest quarter benefited from higher investment banking revenues, solid revenue generation in institutional client services combined with larger gains emanating from the investing and lending segment. Debt underwriting activity remained strong reflecting tight credit spreads and low absolute interest rates. Equity underwriting recovered from a weak 3Q'12, while Goldman retained its relative strength in advisory. Institutional client services remained the largest contributor to the revenue mix despite the effects on customer volumes from macro concerns and the typical seasonal slowdown. Revenues in this segment declined moderately on a linked quarter basis when excluding DVA and the 4Q'12 gain of $500 million on the sale of the hedge fund administration business. This segment posted much better results year-over-year given the difficult market conditions in 4Q'11. Investing and lending revenues were positively affected by realized gains and mark-to-market adjustments in both equity and credit-related positions. The contribution from this area tends to be volatile from quarter to quarter depending on moves in equity markets and credit spreads. Realized gains related to private equity investments are expected to decrease over time as Goldman reduces these and similar investment types in anticipation of the Volcker rule. Asset management revenues improved, owing to higher incentive fees combined with growth in management fees/assets under supervision. Goldman continues to manage liquidity conservatively, while improving already solid capital ratios. Management is taking a cautious approach to overall risk levels as indicated by a restrained average VaR. The subdued VaR also reflects reduced market volatility in recent periods. Operating expenses declined significantly on a linked quarter basis and were up just 3% year-over-year reflecting operating efficiency initiatives including a reduction in staff among other measures. Global core excess liquidity, including unencumbered, highly liquid securities and cash, stood at $175 billion (19% of total assets) at year-end, moderately higher than the prior quarter. Goldman's Tier I common ratio improved to 14.5%. Under Basel III, Goldman's Tier I common ratio was estimated at nearly 9%, compared with 8.5% at prior quarter end. (Caryn Trokie, New York Ratings Unit)
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