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Goldman Sachs Reduces Leverage, Strengthens Balance Sheet

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Strong balance sheet

Goldman Sachs (GS) saw strong growth over the past couple of years on higher investment banking, and investment management business. The company has utilized its reserves to buy back its stock, invest in technology, organic as well as an inorganic expansion of the business.

Its equity has expanded to $82.8 billion in 2014 compared to $75.7 billion in 2012. The company’s stock held in treasury also increased to $58.5 billion as compared to $46.9 billion in 2012.

Goldman Sachs’ total assets stood at $856 billion in 2014, as compared to $911 billion in 2013. The company saw a decline in total assets due to a decline in securities sold under agreements to repurchase, securities loaned, and other secured financings.

The company’s long-term borrowing increased to $168 billion in 2014 as compared to $161 billion in the previous year.

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Moderately leveraged

Goldman Sachs is moderately leveraged, with a leverage ratio of 10.3x as of December 31, 2014, as compared to 11.6x in the previous year. Its debt-to-equity ratio also declined marginally to 2.0x from 2.1x in the previous year.

The company’s long-term borrowing increased to $168 billion in 2014 as compared to $161 billion in the previous year. Goldman Sachs’ book value per share also increased to $163 per share in 2014 as compared to $152 per share in the prior year.

Higher returns over equity

Goldman Sachs generated a return on equity of 11.2% in 2014 as compared to 10.7% in 2012. The company’s other performance parameters like net earnings to average assets and total average equity to average assets also expanded to 0.9% and 9.0%, respectively.

The company’s performance has been backed by an improved balance sheet and operating performance, which is also supported by higher loans and deposits in its banking operations.

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