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GOLDMAN SACHS GROUP INC FILES (8-K) Disclosing Results of Operations and Financial Condition, Other Events, Financial Statements and Exhibits

Edgar Online, Inc.

Item 2.02 Results of Operations and Financial Condition.

On January 16, 2013, The Goldman Sachs Group, Inc. (Group Inc. and, together with its consolidated subsidiaries, the firm) reported its earnings for the fourth quarter and year ended December 31, 2012. A copy of Group Inc.'s press release containing this information is being furnished as Exhibit 99.1 to this Report on Form 8-K and is incorporated herein by reference.

The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of Group Inc. under the Securities Act of 1933 or the Exchange Act.

Item 8.01 Other Events.

On January 16, 2013, Group Inc. reported net revenues of $34.16 billion and net earnings of $7.48 billion for the year ended December 31, 2012. Diluted earnings per common share were $14.13 compared with $4.51 for the year ended December 31, 2011. Return on average common shareholders' equity (ROE) (1) was 10.7% for 2012.

Fourth quarter net revenues were $9.24 billion and net earnings were $2.89 billion. Diluted earnings per common share were $5.60 compared with $1.84 for the fourth quarter of 2011 and $2.85 for the third quarter of 2012. Annualized ROE (1) was 16.5% for the fourth quarter of 2012.

                                  Net Revenues

Investment Banking

Full Year

Net revenues in Investment Banking were $4.93 billion for 2012, 13% higher than 2011. Net revenues in Financial Advisory were $1.98 billion, essentially unchanged compared with 2011. Net revenues in the firm's Underwriting business were $2.95 billion, 25% higher than 2011, due to strong net revenues in debt underwriting. Net revenues in debt underwriting were significantly higher compared with 2011, primarily reflecting higher net revenues from investment-grade and leveraged finance activity. Net revenues in equity underwriting were lower compared with 2011, primarily reflecting a decline in industry-wide initial public offerings.

Fourth Quarter

Net revenues in Investment Banking were $1.41 billion for the fourth quarter of 2012, 64% higher than the fourth quarter of 2011 and 21% higher than the third quarter of 2012. Net revenues in Financial Advisory were $508 million, 8% higher than the fourth quarter of 2011, primarily reflecting an increase in industry-wide completed mergers and acquisitions. Net revenues in the firm's Underwriting business were $897 million, more than double the amount in the fourth quarter of 2011. Net revenues in both debt underwriting and equity underwriting were significantly higher compared with the fourth quarter of 2011, primarily reflecting an increase in industry-wide activity.

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The firm's investment banking transaction backlog increased compared with both the end of the third quarter of 2012 and the end of 2011. (2)




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Institutional Client Services

Full Year

Net revenues in Institutional Client Services were $18.12 billion for 2012, 5% higher than 2011.

Net revenues in Fixed Income, Currency and Commodities Client Execution were $9.91 billion for 2012, 10% higher than 2011. These results reflected strong net revenues in mortgages, which were significantly higher compared with 2011. In addition, net revenues in credit products and interest rate products were solid and higher compared with 2011. These increases were partially offset by significantly lower net revenues in commodities and slightly lower net revenues in currencies. Although broad market concerns persisted during 2012, Fixed Income, Currency and Commodities Client Execution operated in a generally improved environment characterized by tighter credit spreads and less challenging market-making conditions compared with 2011.

Net revenues in Equities were $8.21 billion for 2012, essentially unchanged compared with 2011. Net revenues in securities services were significantly higher compared with 2011, reflecting a gain of approximately $500 million on the sale of the firm's hedge fund administration business. In addition, equities client execution net revenues were higher than 2011, primarily reflecting significantly higher results in cash products, principally due to increased levels of client activity. These increases were partially offset by lower commissions and fees, reflecting lower market volumes. During 2012, Equities operated in an environment generally characterized by an increase in global equity prices and lower volatility levels.

The net loss attributable to the impact of changes in the firm's own credit spreads on borrowings for which the fair value option was elected was $714 million ($433 million and $281 million related to Fixed Income, Currency and Commodities Client Execution and equities client execution, respectively) for 2012, compared with a net gain of $596 million ($399 million and $197 million related to Fixed Income, Currency and Commodities Client Execution and equities client execution, respectively) for 2011.

Fourth Quarter

Net revenues in Institutional Client Services were $4.34 billion for the fourth quarter of 2012, 42% higher than the fourth quarter of 2011 and 4% higher than the third quarter of 2012.

Net revenues in Fixed Income, Currency and Commodities Client Execution were $2.04 billion for the fourth quarter of 2012, 50% higher than the fourth quarter of 2011, reflecting significantly higher net revenues in credit products and mortgages compared with difficult market-making conditions during the fourth quarter of 2011, and higher net revenues in currencies. These increases were partially offset by significantly lower net revenues in commodities and lower net revenues in interest rate products. During the fourth quarter of 2012, Fixed Income, Currency and Commodities Client Execution operated in an environment characterized by generally tighter credit spreads and improved activity levels in credit products and mortgages compared with the fourth quarter of 2011.

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Net revenues in Equities were $2.30 billion for the fourth quarter of 2012, 36% higher than the fourth quarter of 2011, reflecting significantly higher net revenues in securities services and equities client execution. The increase in securities services net revenues compared with the fourth quarter of 2011 reflected a gain of approximately $500 million on the sale of the firm's hedge fund administration business. The increase in equities client execution net revenues compared with the fourth quarter of 2011 reflected significantly higher net revenues in derivatives and higher net revenues in reinsurance. These increases were partially offset by lower commissions and fees, reflecting lower market volumes. During the quarter, Equities operated in an environment generally characterized by low volatility levels and an increase in equity prices in Asia and Europe.




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The net loss attributable to the impact of changes in the firm's own credit spreads on borrowings for which the fair value option was elected was $126 million ($79 million and $47 million related to Fixed Income, Currency and Commodities Client Execution and equities client execution, respectively) for the fourth quarter of 2012. The net gain attributable to the impact of changes in the firm's own credit spreads on borrowings for which the fair value option was elected was $20 million (all related to equities client execution) for the fourth quarter of 2011.


Investing & Lending

Full Year

Net revenues in Investing & Lending were $5.89 billion for 2012. Investing & Lending net revenues were positively impacted by tighter credit spreads and an increase in global equity prices. Results for 2012 included a gain of $408 million from the firm's investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC), net gains of $2.39 billion from other investments in equities, primarily in private equities, net gains and net interest income of $1.85 billion from debt securities and loans, and other net revenues of $1.24 billion, principally related to the firm's consolidated investment entities.

Fourth Quarter

Net revenues in Investing & Lending were $1.97 billion for the fourth quarter of 2012. Investing & Lending net revenues were positively impacted by generally tighter credit spreads and an increase in equity prices in Asia and Europe. Results for the fourth quarter of 2012 included a gain of $334 million from the firm's investment in the ordinary shares of ICBC, net gains of $789 million from other investments in equities, primarily in private equities, net gains and net interest income of $485 million from debt securities and loans, and other net revenues of $365 million, principally related to the firm's consolidated investment entities.

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Investment Management

Full Year

Net revenues in Investment Management were $5.22 billion for 2012, 4% higher than 2011, due to significantly higher incentive fees, partially offset by lower transaction revenues and slightly lower management and other fees. During the year, assets under supervision (3) increased $70 billion to $965 billion. Assets under management increased $26 billion to $854 billion, reflecting net market appreciation of $44 billion, primarily in fixed income and equity assets, partially offset by net outflows of $18 billion. Net outflows included outflows in equity, alternative investment and money market assets, partially offset by inflows in fixed income assets (4). Other client assets increased $44 billion to $111 billion, primarily due to net inflows (4).

Fourth Quarter

Net revenues in Investment Management were $1.52 billion for the fourth quarter of 2012, 20% higher than the fourth quarter of 2011 and 26% higher than the third quarter of 2012. The increase in net revenues compared with the fourth quarter of 2011 was primarily due to significantly higher incentive fees and higher management and other fees. During the quarter, assets under supervision increased $14 billion to $965 billion. Assets under management decreased $2 billion to $854 billion, reflecting net outflows of $7 billion (4), partially offset by net market appreciation of $5 billion. Net outflows included outflows in fixed income, equity and alternative investment assets, partially offset by inflows in money market assets. Other client assets increased $16 billion to $111 billion, primarily due to net inflows.




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                                    Expenses

Operating expenses were $22.96 billion for 2012, essentially unchanged compared with 2011.

Compensation and Benefits

Compensation and benefits expenses (including salaries, discretionary compensation, amortization of equity awards and other items such as benefits) were $12.94 billion for 2012, 6% higher than 2011. The ratio of compensation and benefits to net revenues for 2012 was 37.9% compared with 42.4% for 2011. Total staff (5) decreased 3% compared with the end of 2011.

Non-Compensation Expenses

Full Year

Non-compensation expenses were $10.01 billion for 2012, 4% lower than 2011. The decrease compared with 2011 primarily reflected the impact of expense reduction initiatives, lower brokerage, clearing, exchange and distribution fees, lower occupancy expenses and lower impairment charges. These decreases were partially offset by higher other expenses and increased reserves related to the firm's reinsurance business. The increase in other expenses compared with 2011 primarily reflected higher net provisions for litigation and regulatory proceedings and higher charitable contributions.

Fourth Quarter

Non-compensation expenses were $2.95 billion for the fourth quarter of 2012, 14% higher than the fourth quarter of 2011 and 24% higher than the third quarter of 2012. The increase compared with the fourth quarter of 2011 was due to higher other expenses. The increase in other expenses primarily reflected higher net provisions for litigation and regulatory proceedings and higher charitable contributions.

The fourth quarter of 2012 included $260 million of net provisions for litigation and regulatory proceedings (including the settlement with the Federal Reserve Board regarding the independent foreclosure review) and $157 million of charitable contributions to Goldman Sachs Gives. The fourth quarter of 2011 included $47 million of net provisions for litigation and regulatory proceedings and $78 million of charitable contributions to Goldman Sachs Gives. Compensation was reduced in both 2012 and 2011 to fund the charitable contribution to Goldman Sachs Gives.

Provision for Taxes

The effective income tax rate for 2012 was 33.3%, essentially unchanged from 33.5% for the first nine months of 2012 and up from 28.0% for 2011. The increase from 28.0% to 33.3% was primarily due to the earnings mix and a decrease in the impact of permanent benefits.




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                                    Capital

As of December 31, 2012, total capital was $243.02 billion, consisting of $75.72 billion in total shareholders' equity (common shareholders' equity of $69.52 billion and preferred stock of $6.20 billion) and $167.30 billion in unsecured long-term borrowings. Book value per common share was $144.67, an increase of approximately 11% compared with the end of 2011 and approximately 3% compared with the end of the third quarter of 2012. Tangible book value per common share (6) was $134.06, an increase of approximately 12% compared with the end of 2011 and approximately 3% compared with the end of the third quarter of 2012. Book value and tangible book value per common share are based on common shares outstanding, including restricted stock units granted to employees with no future service requirements, of 480.5 million as of December 31, 2012.

On October 24, 2012, Group Inc. issued 34,000 shares of perpetual 5.95% Non-Cumulative Preferred Stock, Series I (Series I Preferred Stock), for aggregate proceeds of $850 million.

During the year, the firm repurchased 42.0 million shares of its common stock at an average cost per share of $110.31, for a total cost of $4.64 billion, including 12.7 million shares during the fourth quarter at an average cost per share of $120.11, for a total cost of $1.53 billion. The remaining share authorization under the firm's existing repurchase program is 21.5 million shares. (7)

Under the regulatory capital requirements currently applicable to bank holding . . .

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The following exhibit is being furnished as part of this Report on Form 8-K:



     99.1 Press release of Group Inc. dated January 16, 2013 containing financial
          information for its fourth quarter and year ended December 31, 2012.




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