Goldman Sachs : Second Quarter 2020 Earnings Results Presentation

Second Quarter 2020 Earnings Results Presentation

July 15, 2020

Results Snapshot

	Net Revenues		Net Earnings	EPS
2Q	$13.30 billion	2Q	$2.42 billion	2Q	$6.26
2Q YTD	$22.04 billion	2Q YTD	$3.64 billion	2Q YTD	$9.36
	Annualized ROE1	Annualized ROTE1	Impact of Litigation
2Q	11.1%	2Q	11.8%	2Q EPS / YTD EPS	-$2.60 /-$3.15
2Q YTD	8.4%	2Q YTD	9.0%	2Q ROE / YTD ROE	-4.5pp /-2.8pp

Highlights

Second highest quarterly net revenues

Record quarterly Investment Banking net revenues

#1 in Announced and Completed M&A2 #1 in Equity and equity-related offerings2

Highest quarterly FICC net revenues in 9 years Highest quarterly Equities net revenues in 11 years

Record AUS3,4

Standardized CET1 ratio3 increased 110bps QoQ to 13.6%4

1

Macro Perspectives

Macro Factors		Economic Fundamentals
COVID-19 & Shutdown Impact	Near-term Contraction Followed by Recovery
GDP Growth:		U.S.	Global
	2020 | 2021		-4.6% | +5.8%	-3.4% | +6.2%
Economies Beginning to Reopen
Challenging Fundamentals & Improving Sentiment
	Shape of Recovery	Unemployment & Low CEO Confidence
Continued Monetary & Fiscal Stimulus	Spending Better Than	Rising Investor
Unknown
			Expected	Sentiment

Despite economic challenges, market rebounds drove client activity and improving sentiment

Recovery in	Credit Spreads Normalized in	Volatility & Volumes
Equity Markets	the U.S. and Europe	Remain Elevated
S&P 500: +20% in 2Q20	U.S. IG Z-Spread:-85bps QoQ	VIX: -43% QoQ | +102% YoY
MSCI World: +19% in 2Q20	EUR IG Z-Spread:-100bps QoQ	U.S. Cash Equity Volumes: +78% YoY

2020 and 2021 estimated real gross domestic product (GDP) growth per Goldman Sachs Research	2

Financial Overview

Financial Results

								vs.
	$ in millions,			vs.	vs.		2Q20	2Q19
	except per share amounts		2Q20	1Q20	2Q19		YTD	YTD
	Investment Banking	$	2,657	22%	36%	$	4,841	31%
	Global Markets		7,176	39%	93%		12,339	59%
	Asset Management		2,101	N.M.	-18%		2,005	-54%
	Consumer & Wealth Management		1,361	-9%	9%		2,853	15%
	Net revenues	$	13,295	52%	41%	$	22,038	21%
	Provision for credit losses		1,590	70%	N.M.		2,527	N.M.
	Operating expenses		8,400	30%	37%		14,858	24%
	Pre-tax earnings		3,305	145%	6%		4,653	-20%
	Net earnings		2,423	100%	-%		3,636	-22%
	Net earnings to common	$	2,247	100%	2%	$	3,370	-23%
	Diluted EPS	$	6.26	101%	8%	$	9.36	-19%
	ROE1		11.1%	5.4pp	-pp		8.4%	-2.7pp
	ROTE1		11.8%	5.8pp	0.1pp		9.0%	-2.7pp
	Efficiency Ratio3		63.2%	-10.7pp	-1.5pp		67.4%	1.8pp

Financial Overview Highlights

• 2Q20 net revenues were significantly higher YoY, reflecting significantly higher net revenues in Global Markets and Investment Banking and higher net revenues in Consumer & Wealth Management, partially offset by lower net revenues in Asset Management
• 2Q20 provision for credit losses was significantly higher YoY, primarily due to:
• • Revisions to forecasts of expected deterioration in the broader economic environment (incorporating the accounting for credit losses under the Current Expected Credit Losses standard5), which resulted in increased provisions for wholesale loans and, to a lesser extent, consumer loans
  • Individual impairments related to wholesale loans during the quarter
• 2Q20 operating expenses increased significantly YoY, primarily due to:
• • Significantly higher compensation and benefits expenses, reflecting significantly higher net revenues
  • Significantly higher net provisions for litigation and regulatory proceedings
  • Higher expenses related to brokerage, clearing, exchange and distribution fees, reflecting an increase in activity levels
  • Higher expenses related to consolidated investments, including impairments

				2Q20
Litigation Impact	2Q20		YTD
Diluted EPS	$	-2.60	$	-3.15
ROE		-4.5pp		-2.8pp
ROTE		-4.8pp		-2.9pp
Efficiency Ratio		+7.1pp		+5.1pp	3

Investment Banking

Financial Results

								vs.
				vs.	vs.		2Q20	2Q19
$ in millions		2Q20	1Q20	2Q19		YTD	YTD
Financial advisory	$	686	-12%	-11%	$	1,467	-11%
Equity underwriting			1,057	180%	122%		1,435	94%
Debt underwriting		990	70%	93%		1,573	58%
Underwriting		2,047	113%	107%		3,008	73%
Corporate lending		-76	N.M.	N.M.		366	16%
Net revenues		2,657	22%	36%		4,841	31%
Provision for credit losses		819	32%	N.M.		1,441	N.M.
Operating expenses		1,696	45%	62%		2,865	39%
Pre-tax earnings	$	142	-64%	-83%	$	535	-64%
Net earnings	$	64	-82%	-90%	$	418	-64%
Net earnings to common	$	41	-88%	-93%	$	384	-66%
Average common equity	$	11,132	-2%	-4%	$	11,176	3%
Return on average common equity		1.5%	-10.6pp	-19.3pp		6.9%	-14.1pp

Investment Banking Highlights

• 2Q20 net revenues were significantly higher YoY
• • Financial advisory net revenues were lower, reflecting a decrease in industry-wide completed mergers and acquisitions transactions
  • Underwriting net revenues were significantly higher, reflecting record net revenues in both Equity and Debt underwriting, reflecting a significant increase in industry-wide volumes
  • Corporate lending results were significantly lower, reflecting the impact of changes in credit spreads on hedges (2Q20 net loss of $200 million) related to relationship lending activities
• 2Q20 provision for credit losses was significantly higher YoY, reflecting updated economic forecasts and higher impairments related to relationship and middle-market lending
• 2Q20 operating expenses were significantly higher YoY, primarily due to significantly higher net provisions for litigation and regulatory proceedings and compensation and benefits expenses
• • Litigation expense reduced 2Q20 ROE by 16.2pp and 2Q20 YTD ROE by 10.0pp
• The firm formally launched its transaction banking business in the U.S. and increased deposits by $16 billion to $25 billion during the quarter4
• Overall backlog3 decreased significantly QoQ, across advisory, equity underwriting and debt underwriting

Investment Banking Net Revenues ($ in millions)

				$2,657
$1,948		$2,064	$2,184	$990
$1,841
$232	$442
$187
$254
$514	$599	$583
$524	$1,057
	$378
$476		$378
$366
$771	$697	$855	$781	$686
						76
2Q19	3Q19	4Q19	1Q20	2Q20	-$	4
Financial advisory Equity underwriting	Debt underwriting	Corporate lending

Global Markets

Financial Results

							vs.
			vs.	vs.		2Q20	2Q19
$ in millions		2Q20	1Q20	2Q19		YTD	YTD
FICC intermediation	$	3,786	49%	163%	$	6,323	91%
FICC financing		449	4%	71%		881	40%
FICC		4,235	43%	149%		7,204	83%
Equities intermediation		2,199	44%	91%		3,727	61%
Equities financing		742	11%	-14%		1,408	-6%
Equities		2,941	34%	46%		5,135	35%
Net revenues		7,176	39%	93%		12,339	59%
Provision for credit losses		183	169%	N.M.		251	N.M.
Operating expenses		4,172	47%	55%		7,019	29%
Pre-tax earnings	$	2,821	25%	173%	$	5,069	118%
Net earnings	$	1,938	-4%	145%	$	3,961	113%
Net earnings to common	$	1,824	-7%	185%	$	3,788	128%
Average common equity	$	42,987	8%	8%	$	41,133	1%
Return on average common equity		17.0%	-2.7pp	10.6pp		18.4%	10.3pp

Global Markets Highlights

• 2Q20 net revenues were significantly higher YoY, primarily driven by higher client activity
• • FICC net revenues were significantly higher YoY, reflecting significantly higher intermediation net revenues and financing net revenues
  • Equities net revenues were significantly higher YoY, reflecting significantly higher intermediation net revenues, partially offset by lower financing net revenues
• 2Q20 provision for credit losses was significantly higher YoY, reflecting updated economic forecasts for the mortgage lending portfolio
• 2Q20 operating expenses were significantly higher YoY, reflecting significantly higher compensation and benefits expenses and net provisions for litigation and regulatory proceedings and higher brokerage, clearing, exchange and distribution fees
• • Litigation expense reduced 2Q20 ROE by 4.4pp and 2Q20 YTD ROE by 2.8pp

Global Markets Net Revenues ($ in millions)

						$7,176
					$5,163	$2,941
$3,716	$3,543	$3,480	$2,194
$2,014	$1,864	$1,711		$4,235
					$2,969
$1,702	$1,679	$1,769
2Q19	3Q19			4Q19	1Q20	2Q20
				FICC Equities		5

Global Markets - FICC & Equities

FICC Highlights

• 2Q20 net revenues were significantly higher YoY
• • FICC intermediation net revenues were significantly higher, reflecting significantly higher net revenues across all major businesses, particularly in interest rate products, credit products and commodities
  • FICC financing net revenues were significantly higher, primarily driven by repurchase agreements
• 2Q20 operating environment was characterized by continued strong client activity, as volatility remained high, while interest rates remained low and credit spreads tightened during the quarter

FICC Net Revenues ($ in millions)

				$4,235
				$449
			$2,969
			$432
$1,702	$1,679	$1,769		$3,786
$387
$262	$364	$2,537
$1,440	$1,315	$1,382
2Q19	3Q19	4Q19	1Q20	2Q20
		Intermediation	Financing

Equities Highlights

• 2Q20 net revenues were significantly higher YoY
• • Equities intermediation net revenues were significantly higher, reflecting significantly higher net revenues in both cash products and derivatives
  • Equities financing net revenues were lower, reflecting lower average customer balances, tighter spreads and a decrease in dividends
• 2Q20 operating environment was characterized by continued strong client activity, as volatility remained high and global equity prices were generally higher compared to 1Q20

Equities Net Revenues ($ in millions)

				$2,941
$2,014	$1,864		$2,194	$742
$1,711
	$666
$860
$784	$732
			$2,199
			$1,528
$1,154	$1,080	$979
2Q19	3Q19	4Q19	1Q20	2Q20
		Intermediation	Financing	6

Asset Management

Financial Results

							vs.
			vs.	vs.		2Q20	2Q19
$ in millions		2Q20	1Q20	2Q19		YTD	YTD
Management and other fees	$	684	7%	3%	$	1,324	4%
Incentive fees		34	-78%	10%		188	N.M.
Equity investments		924	N.M.	-38%		902	-61%
Lending and debt investments		459	N.M.	31%		-409	N.M.
Net revenues		2,101	N.M.	-18%		2,005	-54%
Provision for credit losses		271	N.M.	N.M.		350	N.M.
Operating expenses		1,332	11%	7%		2,530	8%
Pre-tax earnings	$	498	N.M.	-60%	$	-875	N.M.
Net earnings	$	552	N.M.	-43%	$	-684	N.M.
Net earnings to common	$	526	N.M.	-44%	$	-724	N.M.
Average common equity	$	19,457	-8%	-10%	$	20,449	-3%
Return on average common equity		10.8%	34.4pp	-6.5pp		-7.1%	-21.2pp

Asset Management Highlights

• 2Q20 net revenues were lower YoY
• • Management and other fees from institutional and third-party distribution asset management clients were slightly higher, reflecting higher average AUS, partially offset by a lower average effective fee due to shifts in the mix of client assets and strategies
  • Equity investments net revenues reflected significantly lower net gains from investments in private equities (2Q20: ~$290 million; 2Q19: ~$1.20 billion), partially offset by significantly higher net gains from investments in public equities (2Q20: ~$635 million; 2Q19: ~$300 million)
  • Lending and debt investments net revenues were significantly higher, reflecting significantly higher net gains as corporate credit spreads tightened during the quarter
• 2Q20 provision for credit losses was significantly higher YoY, reflecting updated economic forecasts and higher impairments related to the private credit and real estate portfolios

Asset Management Net Revenues ($ in millions)

$2,548			$3,003
		$427
				$2,101
$351
	$1,621	$1,865		$459
$1,499		$341
			$924
		$596		-$96
$31			$34
	$24	$45	$154
$667		$660	$666	$640	$684
				-$22
				-$868
2Q19	3Q19	4Q19	1Q20	2Q20
Management and other fees	Incentive fees	Equity investments	Lending and debt investments	7

Asset Management - Asset Mix

2Q20 Equity Investments of $20 Billion4

$17 Billion Private, $3 Billion Public

	By Vintage			By Geography
	2017-	2013 or
	Present			Asia
	30%	Earlier
		37%			36%	Americas
	2014 -					48%
			EMEA
	2016
				16%
	33%
			Real Estate
	Financials		(Mixed Use 5%, Office 3%,	Natural Resources &
		Multifamily 3%, Other 7%)
							Utilities
By Sector	28%		27%	18%	7%	7%	7% 6% Healthcare

TMT

Industrials

Other

• In addition, the firm's consolidated investment entities6 have a carrying value of $20 billion, funded with liabilities of approximately $11 billion, substantially all of which were nonrecourse

By Geography		By Asset Class
(Net of Financing)		(Net of Financing)
		Office		Senior	Student
Asia			Housing	Housing Retail
19%
EMEA	Americas
61%	29%	25%	11%	9%	8%	7%	7% 4%Hospitality
20%
			Multifamily		Other	Industrials

2Q20 Lending and Debt Investments of $30 Billion4

$17 Billion Loans (88% Secured)

$13 Billion Debt Investments

By Accounting Classification	By Geography
Loans
at FV
13%
Loans at	Asia
22%
Debt amortized	Americas
Investments cost 43%	EMEA	46%
at FV 44%
	32%

Industrials

Other

Healthcare

By Sector	34%	15%	13%	12% 8% 8%	6% 4%	Natural Resources
						& Utilities
					Consumer
	Real Estate		TMT	Financials

8

Consumer & Wealth Management

Financial Results

								vs.
				vs.	vs.		2Q20	2Q19
$ in millions		2Q20	1Q20	2Q19		YTD	YTD
Management and other fees	$	938	-2%	13%	$	1,897	17%
Incentive fees		10	-86%	-23%		79	93%
Private banking and lending		155	-15%	-17%		337	-14%
Wealth management		1,103	-9%	7%		2,313	12%
Consumer banking		258	-9%	19%		540	29%
Net revenues		1,361	-9%	9%		2,853	15%
Provision for credit losses		317	89%	N.M.		485	144%
Operating expenses		1,200	-4%	5%		2,444	14%
Pre-tax earnings	$	-156	N.M.	N.M.	$	-76	N.M.
Net earnings	$	-131	N.M.	N.M.	$	-59	N.M.
Net earnings to common	$	-144	N.M.	N.M.	$	-78	N.M.
Average common equity	$	7,536	8%	28%	$	7,288	24%
Return on average common equity		-7.6%	-11.4pp	-8.4pp		-2.1%	-5.2pp

Consumer & Wealth Management Highlights

• 2Q20 net revenues were higher YoY
• • Wealth management net revenues were higher, due to higher Management and other fees (including the impact of the consolidation of GS Personal Financial Management7), primarily reflecting higher average AUS and higher transaction volumes, partially offset by lower net revenues in Private banking and lending, primarily reflecting lower interest rates
  • Consumer banking net revenues were higher, as 2Q20 included credit card loans
• 2Q20 provision for credit losses was significantly higher YoY, reflecting updated economic forecasts for the consumer lending portfolio
• Continued to scale the digital consumer deposit platforms, as consumer deposits increased by a record $20 billion in 2Q20 to $92 billion4
• The firm continued to support Marcus and Apple Card consumers during the quarter and extended the flexibility to defer payments without incurring any charges for the Apple Card through July 2020

Consumer & Wealth Management Net Revenues ($ in millions)

			$1,408	$1,492	$1,361
	$1,318
$1,249			$282
		$228	$258
	$217
$216		$194	$182
$199		$155
		$69
$187		$19
$13	$21	$10
$833	$881		$967	$959	$938

2Q19	3Q19	4Q19	1Q20	2Q20	9
Management and other fees	Incentive fees Private banking and lending	Consumer banking

Firmwide Assets Under Supervision

Firmwide Assets Under Supervision3,4

		By Segment			vs.	vs.
$ in billions		2Q20		1Q20		2Q19	1Q20	2Q19
Asset Management	$	1,499	$	1,309	$	1,171	15%	28%
Consumer & Wealth Management		558		509		489	10%	14%
Firmwide AUS	$	2,057	$	1,818	$	1,660	13%	24%

		By Asset Class			vs.	vs.
$ in billions		2Q20		1Q20		2Q19	1Q20	2Q19
Alternative investments	$	179	$	178	$	174	1%	3%
Equity		394		335		350	18%	13%
Fixed income		817		771		749	6%	9%
Long-term AUS		1,390		1,284		1,273	8%	9%
Liquidity products		667		534		387	25%	72%
Firmwide AUS	$	2,057	$	1,818	$	1,660	13%	24%

Organic Long-Term Net Flows3,4 ($ in billions)

(Excludes Acquisitions)

$42

$36 $37

$27

$7

2016

2017

2018

2019

2020 YTD

Assets Under Supervision Highlights3,4

• Firmwide AUS increased $239 billion during the quarter to a record $2.06 trillion, including Asset Management AUS increasing $190 billion and Consumer & Wealth Management AUS increasing $49 billion
• • Net market appreciation of $100 billion, primarily in equity and fixed income assets
  • Liquidity products net inflows of $133 billion
  • Long-termnet inflows of $6 billion

2Q20 AUS Mix3,4

Asset		Distribution	Region		Vehicle
Class	Alternative	Channel			Private
9%			8%	Asia	11%
investments			funds
19%		27%	Wealth	14%	EMEA		and other
Equity	management
						37%	Public
							funds
32%	Liquidity	35%	Institutional
products
				78%	Americas
40%						52%	Separate
Fixed	38%	Third-party				accounts
	income		distributed

10

Net Interest Income and Loans

Net Interest Income by Segment ($ in millions)

$1,313

$1,071		$944
				$493
$397		$397
				$171
$75
$483	$511	$629
$116	$138
					-$75	-$7(IB)
			2Q19	1Q20	2Q20
		Investment Banking	Global Markets Asset Management	Consumer & Wealth Management

Net Interest Income Highlights

• 2Q20 net interest income decreased $127 million YoY
• The YoY decrease in net interest income reflected the impact of lower interest rates and an increase in lower-risk,lower-yielding global core liquid assets

		Loans4					Metrics
$ in billions		2Q20		1Q20		2Q19
Corporate	$	59	$	68	$	47		3.7%
Wealth management		28		29		25
				ALLL to Total
								Gross Loans, at
Commercial real estate		17		17		15		Amortized Cost
								2.8%
Residential real estate		5		4		6
								ALLL to Gross
Installment		5		5		5		Wholesale Loans, at
				Amortized Cost
Credit cards		2		2		-		17.0%
Other		5		6		4
				ALLL to Gross
								Consumer Loans, at
Allowance for loan losses		(4)		(3)		(1)		Amortized Cost
Total Loans	$	117	$	128	$	101

Lending Highlights

• Total loans decreased $11 billion, down 9% QoQ, reflecting paydowns on committed corporate lines
• Total allowance was $4.39 billion (including $3.90 billion for funded loans), up $1.19 billion QoQ
• • $3.24 billion for wholesale loans, $1.15 billion for consumer loans
• Provision for credit losses of $1.59 billion in 2Q20, up from $937 million in 1Q20
• 2Q20 net charge-offs of $260 million for an annualized net charge-off rate of 0.9%, up 40bps QoQ
• • Wholesale annualized net charge-off rate of 0.7%, up 50bps QoQ

- Consumer annualized net charge-off rate of 5.1%, up 30bps QoQ

11

Expenses

Financial Results

							vs.
			vs.	vs.		2Q20	2Q19
$ in millions	2Q20	1Q20	2Q19		YTD	YTD
Compensation and benefits	$	4,478	38%	35%	$	7,713	17%
Brokerage, clearing, exchange and
	945	-3%	15%		1,920	21%
distribution fees
Market development		89	-42%	-52%		242	-35%
Communications and technology		345	7%	19%		666	16%
Depreciation and amortization		499	14%	25%		936	22%
Occupancy		233	-2%	-%		471	3%
Professional fees	311	-10%	3%		658	10%

Expense Highlights

• 2Q20 total operating expenses increased significantly YoY, reflecting:
• • Significantly higher compensation and benefits expenses, reflecting significantly higher net revenues
  • Significantly higher non-compensation expenses, which included:

1. Significantly higher net provisions for litigation and regulatory proceedings

1. Higher expenses related to brokerage, clearing, exchange and distribution fees, reflecting an increase in activity levels

1. Higher expenses related to consolidated investments, including impairments

• 1. Remainder of the increase primarily attributable to higher expenses related to technology, the firm's credit card activities and the impact of the consolidation of GS Personal Financial Management7, partially offset by lower travel and entertainment expenses
• 2Q20 YTD effective income tax rate was 21.9%, up from 10.0% for 1Q20, primarily due to a decrease in the impact of permanent tax benefits and an increase in provisions for non-deductible litigation in the first half of 2020 compared with 1Q20

Efficiency Ratio3

Other expenses		1,500	99%	164%		2,252	114%
Total operating expenses	$	8,400	30%	37%	$	14,858	24%
Provision for taxes	$	882	N.M.	25%	$	1,017	-13%
Effective Tax Rate						21.9%	1.8pp

63%

67%

	2Q20	2Q20 YTD
Impact of Litigation:	+7.1pp	+5.1pp	12

Capital and Balance Sheet

Capital3,4

$ in billions		2Q20		1Q20		2Q19
Common equity tier 1 (CET1) capital	$	76.8	$	74.6	$	75.6
Standardized RWAs	$	563	$	594	$	548
Standardized CET1 capital ratio		13.6%		12.5%		13.8%
Advanced RWAs	$	620	$	606	$	559
Advanced CET1 capital ratio		12.4%		12.3%		13.5%
Supplementary leverage ratio		6.7%8		5.9%		6.4%

Selected Balance Sheet Data4

$ in billions	2Q20			1Q20		2Q19
Total assets	$	1,142	$	1,090	$	945
Deposits	$	268	$	220	$	166
Unsecured long-term borrowings	$	223	$	226	$	221
Shareholders' equity	$	92	$	92	$	91
Average GCLA3	$	290	$	243	$	225

Capital and Balance Sheet Highlights

• Both Standardized and Advanced CET1 ratios increased QoQ
• • Increase in CET1 capital reflected net earnings in excess of dividends
  • Decrease in Standardized RWAs reflected lower credit RWAs due to reduced exposure
  • Increase in Advanced RWAs reflected the impact of increased volatility
• Returned $450 million of capital in common stock dividends
• • The firm did not repurchase any shares in 2Q20 and will not in 3Q203
• The firm's balance sheet increased $52 billion QoQ
• • Maintained highly liquid balance sheet as GCLA3 averaged $290 billion4 for 2Q20
  • Deposits increased $48 billion QoQ, reflecting an increase in consumer, transaction banking and private bank deposits
• BVPS decreased QoQ, driven by debt valuation adjustment on tightening of the firm's credit spreads

Book Value

In millions, except per share amounts		2Q20		1Q20		2Q19
Basic shares3		355.8		355.7		372.2
Book value per common share	$	227.31	$	228.21	$	214.10
Tangible book value per common share1	$	213.84	$	214.69	$	203.05

13

Cautionary Note Regarding Forward-Looking Statements

This presentation contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, but instead represent only the firm's beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the firm's control. It is possible that the firm's actual results, financial condition and liquidity may differ, possibly materially, from the anticipated results, financial condition and liquidity indicated in these statements. For information about some of the risks and important factors that could affect the firm's future results, financial condition and liquidity and the forward-looking statements below, see "Risk Factors" in Part II, Item 1A of the firm's Quarterly Report on Form 10-Q for the period ended March 31, 2020 and in Part I, Item 1A of the firm's Annual Report on Form 10-K for the year ended December 31, 2019.

Information regarding the firm's assets under supervision, capital ratios, risk-weighted assets, supplementary leverage ratio, balance sheet data and global core liquid assets (GCLA) consists of preliminary estimates. These estimates are forward-looking statements and are subject to change, possibly materially, as the firm completes its financial statements.

Statements regarding (i) estimated GDP growth, (ii) the impact of the COVID-19 pandemic on the firm's business, results, financial position and liquidity, (iii) the timing, profitability, benefits and other prospective aspects of business initiatives and the achievability of medium- and long-term targets and goals, (iv) the future state of the firm's liquidity and regulatory capital ratios, (v) the firm's prospective capital distributions (including dividends), (vi) the firm's future effective income tax rate, and (vii) the firm's investment banking transaction backlog are forward-looking statements. Statements regarding estimated GDP growth are subject to the risk that actual GDP growth may differ, possibly materially, due to, among other things, changes in general economic conditions. Statements about the effects of the COVID-19 pandemic on the firm's business, results, financial position and liquidity are subject to the risk that the actual impact may differ, possibly materially, from what is currently expected. Statements about the timing, profitability, benefits and other prospective aspects of business initiatives and the achievability of medium and long-term targets and goals are based on the firm's current expectations regarding our ability to implement these initiatives and achieve these targets and goals and may change, possibly materially, from what is currently expected. Statements about the future state of the firm's liquidity and regulatory capital ratios, as well as its prospective capital distributions, are subject to the risk that the firm's actual liquidity, regulatory capital ratios and capital distributions may differ, possibly materially, from what is currently expected. Statements about the firm's future effective income tax rate are subject to the risk that the firm's future effective income tax rate may differ from the anticipated rate indicated, possibly materially, due to, among other things, changes in the firm's earnings mix or profitability, the entities in which the firm generates profits and the assumptions made in forecasting the firm's expected tax rate, and potential future guidance from the U.S. IRS. Statements about the firm's investment banking transaction backlog are subject to the risk that transactions may be modified or not completed at all and associated net revenues may not be realized or may be materially less than those currently expected. Important factors that could have such a result include, for underwriting transactions, a decline or weakness in general economic conditions, an outbreak of hostilities, volatility in the securities markets or an adverse development with respect to the issuer of the securities and, for financial advisory transactions, a decline in the securities markets, an inability to obtain adequate financing, an adverse development with respect to a party to the transaction or a failure to obtain a required regulatory approval.

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Footnotes

1. Annualized return on average common shareholders' equity (ROE) is calculated by dividing annualized net earnings applicable to common shareholders by average monthly common shareholders' equity. Annualized return on average tangible common shareholders' equity (ROTE) is calculated by dividing annualized net earnings applicable to common shareholders by average monthly tangible common shareholders' equity. Tangible common shareholders' equity is calculated as total shareholders' equity less preferred stock, goodwill and identifiable intangible assets. Tangible book value per common share (TBVPS) is calculated by dividing tangible common shareholders' equity by basic shares. Management believes that tangible common shareholders' equity and TBVPS are meaningful because they are measures that the firm and investors use to assess capital adequacy and that ROTE is meaningful because it measures the performance of businesses consistently, whether they were acquired or developed internally. Tangible common shareholders' equity, ROTE and TBVPS are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other companies.

The table below presents a reconciliation of average and ending common shareholders' equity to average and ending tangible common shareholders' equity:

		AVERAGE FOR THE					AS OF
	THREE MONTHS ENDED	SIX MONTHS ENDED
Unaudited, $ in millions		JUNE 30, 2020	JUNE 30, 2020		JUNE 30, 2020	MARCH 31, 2020		JUNE 30, 2019
Total shareholders' equity	$	92,315	$	91,249	$	92,079	$	92,379	$	90,892
Preferred stock		(11,203)		(11,203)		(11,203)		(11,203)		(11,203)
Common shareholders' equity		81,112		80,046		80,876		81,176		79,689
Goodwill and identifiable intangible assets		(4,806)		(4,814)		(4,792)		(4,810)		(4,114)
Tangible common shareholders' equity	$	76,306	$	75,232	$	76,084	$	76,366	$	75,575

1. Dealogic - January 1, 2020 through June 30, 2020.
2. For information about the following items, see the referenced sections in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the firm's Quarterly Report on Form 10-Q for the period ended March 31, 2020: (i) investment banking transaction backlog - see "Results of Operations - Investment Banking" (ii) assets under supervision - see "Results of Operations - Assets Under Supervision" (iii) efficiency ratio - see "Results of Operations - Operating Expenses" (iv) basic shares - see "Balance Sheet and Funding Sources - Balance Sheet Analysis and Metrics" (v) share repurchase program - see "Equity Capital Management and Regulatory Capital - Equity Capital Management" and (vi) global core liquid assets - see "Risk Management - Liquidity Risk Management."
   For information about risk-based capital ratios and the supplementary leverage ratio, see Note 20 "Regulation and Capital Adequacy" in Part I, Item 1 "Financial Statements (Unaudited)" in the firm's Quarterly Report on Form 10-Q for the period ended March 31, 2020.
3. Represents a preliminary estimate for the second quarter of 2020 and may be revised in the firm's Quarterly Report on Form 10-Q for the period ended June 30, 2020.
4. In the first quarter of 2020, the firm adopted ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments." For further information about ASU No. 2016-13, see Note 3 "Significant Accounting Policies" in Part I, Item 1 "Financial Statements (Unaudited)" in the firm's Quarterly Report on Form 10-Q for the period ended March 31, 2020.
5. Includes consolidated investment entities, substantially all of which related to entities engaged in real estate investment activities. These assets are generally accounted for at historical cost less depreciation.
6. GS Personal Financial Management, formerly United Capital Financial Partners, Inc., was acquired by the firm in the third quarter of 2019.
7. In the second quarter of 2020, the U.S. Federal Reserve revised the calculation of the supplementary leverage ratio to exclude U.S. Treasury securities and cash held at the U.S. Federal Reserve. The estimated impact of this

change was an increase in the firm's supplementary leverage ratio of approximately 0.8 percentage points.	15