Goldman Sachs : Bank Europe SE – 2023 Half-yearly Financial Information (English) -September 15, 2023 at 07:53 am EDT

GOLDMAN SACHS BANK EUROPE SE

Interim Management Report

Introduction

Goldman Sachs Bank Europe SE (GSBE or the bank) is engaged in a wide range of activities primarily in the E.U., including underwriting and market making in debt and equity securities and derivatives, asset and wealth management services, deposit-taking, lending (including securities lending), advisory services and transaction banking services. The bank is a primary dealer for government bonds issued by E.U. sovereigns. The bank serves a diversified client base that includes corporations, financial institutions, governments and individuals, from its registered office in Frankfurt am Main and branches in Amsterdam, Athens, Copenhagen, Dublin, London, Luxembourg, Madrid, Milan, Paris, Stockholm and Warsaw. The bank is registered with the commercial register number HRB 114190.

The bank is directly supervised by the European Central Bank (ECB) and additionally by the Federal Financial Supervisory Authority (BaFin) and the Deutsche Bundesbank in the context of the E.U. Single Supervisory Mechanism.

The bank is a wholly-owned subsidiary of Goldman Sachs Bank USA (GS Bank USA), a New York State-chartered bank and a member of the Federal Reserve System (FRB). The bank’s ultimate parent undertaking and controlling entity is The Goldman Sachs Group, Inc. (Group Inc.). Group Inc. is a bank holding company and a financial holding company regulated by the FRB. In relation to the bank, “GS Group affiliate” means Group Inc. or any of its subsidiaries. Group Inc., together with its consolidated subsidiaries, form “GS Group”. GS Group is a leading global financial institution that delivers a broad range of financial services to a large and diversified client base that includes corporations, financial institutions, governments and individuals.

The bank seeks to be the advisor of choice for its clients and a leading participant in financial markets. As part of GS Group, the bank also enters into transactions with affiliates in the normal course of business as part of its market-making activities and general operations.

The bank generates revenues from the following business activities: Investment Banking; Fixed Income, Currency and Commodities (FICC); Equities; and Investment Management, which includes Asset management and Wealth management.

The bank strives to maintain a work environment that fosters professionalism, excellence, diversity, cooperation among employees and high standards of business ethics. The bank recognises that it needs the most talented people to deliver outstanding results for clients. A diverse workforce in terms of gender, ethnicity, sexual orientation, background, culture and education ensures the development of better ideas, products and services. For further information about Goldman Sachs’ people, culture and commitment to diversity, see www.goldmansachs.com/our-commitments/diversity-and-inclusion/.

All references to June 2023 and June 2022 refer to the periods ended, or the dates, as the context requires, June 30, 2023 and June 30, 2022, respectively. All references to December 2022 refer to the date December 31, 2022. All references to “the 2022 Annual Report” are to the bank’s Annual Financial Statements and Management Report for the year ended December 31, 2022, which is available at www.goldmansachs.com/investor-relations/financials/. Any statements relating to future periods are subject to a high degree of uncertainty.

This half-yearly financial information, together with the interim management report, as of June 30, 2023 are neither subject to an auditor’s review nor have they been reviewed in accordance with Sec 317 of the German Commercial Code (HGB).

The bank uses certain key performance indicators (KPIs) to measure financial performance as well as to manage the development of its business and capital strength. The primary KPI’s for the development of the bank’s business are net revenues and net income. Net revenues is defined as the sum of interest income, interest expense, commission income, commission expense and net trading result. The primary KPI to manage the bank’s capital strength is the total capital ratio. The bank’s results presented in the interim management report have been prepared under the German Commercial Code (HGB).

Results of Operations

Net Revenues

Net revenues arise from transactions with both third parties and GS Group affiliates. The bank has revenue sharing agreements with GS Group affiliates related to certain activities under which it receives revenues from, and transfer revenues to, such affiliates. See “Results of Operations – Net Revenues” in Part I of the 2022 Annual Report for a description of each business activity.

The table below presents net revenues by business activity.

The bank has updated the definition of net revenues to exclude other operating income. The bank has also updated its methodology for allocation of funding costs and trading related special reserve, reported within net revenues, to its business activities. As a result, in the table above, comparatives have been conformed to the current period presentation, with a decrease in net revenues by €8 million.

GOLDMAN SACHS BANK EUROPE SE

Interim Management Report

Net Income

Net income was €299 million for the six months ended June 2023, 81% higher than the six months ended June 2022, primarily due to significantly higher result from ordinary activities, partially offset by higher income tax expense.

Balance Sheet

As of June 2023, total assets were €81.49 billion, an increase of €14.80 billion from December 2022, primarily reflecting an increase in trading assets of €13.62 billion.

As of June 2023, total liabilities were €69.10 billion, an increase of €11.24 billion from December 2022, primarily reflecting an increase in liabilities to customers of €12.65 billion partially offset by a decrease in other liabilities of €1.65 billion.

As of June 2023, total shareholder’s equity was €12.39 billion, an increase of €3.56 billion from December 2022, primarily reflecting an increase in the capital reserve of €3.26 billion and the bank’s profit for the six months ended June 2023 of €299 million.

Regulatory Capital

The bank is subject to the capital requirements prescribed in the amended E.U. Capital Requirements Directive (CRD) and E.U. Capital Requirements Regulation (CRR), which are largely based on the Basel Committee on Banking Supervision’s (Basel Committee) capital framework for strengthening international capital standards.

The bank uses International Financial Reporting Standards as the basis of accounting, in accordance with Art. 24 (2) of Regulation (EU) No 575/2013, while calculating its prudential capital requirements.

The risk-based capital requirements are expressed as capital ratios that compare measures of regulatory capital to risk- weighted assets (RWAs). The Common Equity Tier 1 (CET1) capital ratio is defined as CET1 capital divided by RWAs. The Tier 1 capital ratio is defined as Tier 1 capital divided by RWAs. The total capital ratio is defined as total capital divided by RWAs.

The CET1 capital, Tier 1 capital and total capital ratio requirements (collectively, the Pillar 1 capital requirements) are supplemented by additional capital buffers and requirements. See “Regulatory Capital” in Part I of the 2022 Annual Report for further information on capital buffers and requirements.

Regulatory Risk-Based Capital Ratios

The table below presents information about the bank’s risk- based capital requirements.

In the table above, the increase in risk-based capital requirements is primarily driven by an increase in the other systemically important institutions (O-SII) buffer by 25bps effective January 1, 2023 and countercyclical capital buffer (CCyB) by 38bps mainly due to increased CCyB rates across certain jurisdictions where the bank has exposures.

The table below presents information about the bank’s risk- based capital ratios.

In the table above:

• CET1 capital comprises the bank’s shareholder’s equity less certain regulatory adjustments and deductions.
• The risk-based capital ratios as of June 2023 included the bank’s profits after foreseeable charges for the six months ended June 2023, which are still subject to approval by the bank’s shareholder. These profits contributed approximately 112 basis points to the CET1 capital ratio.

GOLDMAN SACHS BANK EUROPE SE

Interim Management Report

Leverage Ratio

The bank is subject to a minimum leverage ratio requirement of 3.0%. The leverage ratio compares Tier 1 capital to a measure of leverage exposure, defined as the sum of certain assets plus certain off-balance-sheet exposures (which include a measure of derivatives, securities financing transactions, commitments and guarantees), less Tier 1 capital deductions.

The table below present information about the bank’s leverage ratio.

In the table above, the leverage ratio as of June 2023 included the bank’s profits after foreseeable charges for the six months ended June 2023, which are still subject to approval by the bank’s shareholder. These profits contributed approximately 34 basis points to the leverage ratio.

Minimum Requirement for Own Funds and Eligible Liabilities (MREL)

The CRR and the E.U. Bank Recovery and Resolution Directive (BRRD) are designed to, among other things, implement the Financial Stability Board’s (FSB) minimum Total Loss Absorbing Capacity (TLAC) requirement for global systemically important banks (G-SIB). The CRR requires material subsidiaries of non-E.U.G-SIBs, such as GSBE, to meet internal TLAC (iTLAC) requirements equivalent to 90% of the external TLAC requirement applicable to E.U. G-SIBs. The bank satisfies this requirement through its regulatory capital and MREL eligible debt from intercompany borrowings.

The BRRD, as amended by BRRD II subjects institutions to a minimum requirement for own funds and eligible liabilities. The Single Resolution Board’s internal MREL (iMREL) requirements applicable to the bank are phasing in through January 1, 2024. The minimum iMREL to RWAs requirement will be set at 22%, a higher level than the iTLAC to RWAs requirement (excluding any combined buffer requirements). As of June 2023, the bank was in compliance with its forthcoming iMREL requirements.

The table below presents information about the bank’s iTLAC requirements.

The table below presents information about the bank’s iTLAC ratios.

In the tables above:

• iTLAC comprises the bank’s total regulatory capital and MREL eligible debt from intercompany borrowings.
• iTLAC to RWAs requirements includes capital conservation buffer, CCyB buffer and O-SII buffer. See “Regulatory Capital” in Part I of the 2022 Annual Report for further information on the capital buffers.
• iTLAC ratios as of June 2023 reflect the bank’s profits after foreseeable charges for the six months ended June 2023, which are still subject to approval by the bank’s shareholder. These profits contributed approximately 112 basis points to the iTLAC to RWAs ratio and 34 basis points to the iTLAC to leverage exposure ratio.