Overview of Goldman Sachs. November 2017

Transcription

1 Overview of Goldman Sachs November 207

2 Cautionary Note on Forward-Looking Statements This presentation may include forward-looking statements. These 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 and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect the Firm s future results and financial condition, see Risk Factors in our Annual Report on Form 0-K ( Form 0-K ) for the year ended December 3, 206. You should also read the forwardlooking disclaimers in our Form 0-Q for the period ended September 30, 207, particularly as it relates to capital, liquidity, and leverage ratios, including the Common Equity Tier ( CET ) ratios under the Advanced and Standardized approaches on a fully phased-in basis and the supplementary leverage ratio ( SLR ), and information on the calculation of non-gaap financial measures that is posted on the Investor Relations portion of our website: See the appendix for more information about non-gaap financial measures in this presentation. Except as may be indicated on a particular slide, the statements in the presentation are current only as of its date November 3, 207.

3 Key Credit Strengths Well-Positioned with respect to Regulatory Capital Ratios and Strong Balance Sheet The firm is well-positioned for regulatory capital requirements with 3Q7 CET ratios of 3.3% and 2.0% under the Standardized and Basel III Advanced approaches, respectively, reflecting the applicable transitional provisions Our gross leverage is 0.8x as of 3Q7 In addition, ~97% of our balance sheet is marked to market or carried at amounts that approximate fair value as of 3Q7, which means our equity reflects market value Best in Class Liquidity Risk Management Global Core Liquid Assets We have in place a comprehensive and conservative set of liquidity and funding policies that allows us to maintain significant flexibility to address both GS-specific and broader industry or market liquidity stress events Our two major liquidity and funding policies are based on the core principles of: Excess liquidity refers to having sufficient cash or highly liquid instruments on hand to meet contractual, contingent and intraday outflows in a stressed environment Asset-liability management refers to having a liability profile that has sufficient term and diversification based upon the liquidity profile of our assets Under the rules on minimum liquidity requirements, approved by the U.S. federal bank regulatory agencies, our average liquidity coverage ratio ( LCR ) exceeded the minimum requirement for the three months ended September 207 We hold sufficient excess liquidity in the form of Global Core Liquid Assets ( GCLA ) to cover potential outflows during a stressed period GCLA ended 3Q7 at $220 billion, reflecting ~24% of our period-end balance sheet GCLA consists of cash, high quality and narrowly defined unencumbered assets, including U.S. Treasuries and German, French, Japanese and United Kingdom government obligations In addition, our U.S. bank subsidiary, GS Bank USA, has access to funding through the Federal Reserve Bank discount window. While we do not rely on this funding in our liquidity planning and stress testing, we maintain policies and procedures necessary to access this funding and test discount window borrowing procedures 2

4 Key Credit Strengths (cont d) Conservative Asset-Liability Management Our principal objective is to fund our balance sheet and run the firm with the ability to weather stressed market conditions without dependence on government support Balance sheet comprised of highly liquid assets Greater than 90% of the balance sheet was comprised of more liquid assets (e.g., cash, reverses/borrows, U.S. government/agency and other financial instruments) as of 3Q7 Businesses subject to conservative balance sheet limits that are reviewed regularly and monitored daily Liability term structure we seek to have long-dated liabilities to reduce our refinancing risk Weighted Average Maturity (WAM) of approximately 8 years as of 3Q7 for unsecured long-term borrowings WAM >20 days for secured funding 2 as of 3Q7 (excluding funding that can only be collateralized by highly liquid securities eligible for inclusion in our GCLA) We maintain broad and diversified funding sources globally Counterparties well distributed throughout the U.S., Europe and Asia The balance sheet stands at $930 billion as of 3Q7, down ~7% vs. 4Q07 Strong Asset Quality Diversified Global Business with Profitable Track Record Our asset quality has substantially improved since 4Q07 as our balance sheet reductions targeted less liquid, legacy exposures such as Level 3 assets Level 3 assets 3 are down by more than 50% since 4Q07 to $2 billion and represent 2.2% of our balance sheet as of 3Q7 From , net revenues have grown at a compound annual growth rate of approximately 5% Average ROE from of approximately 6% Our diversified business model allows us to outperform through cycles Although our FICC and Equities Client Execution businesses averaged approximately 39% of net revenues from 2009 through 206, these businesses are diversified across various products, markets, and regions designed to serve our global client base, which includes corporations, financial institutions and governments Excludes Level 3, other assets, and investments in funds at NAV 2 Comprised of collateralized financings from the Consolidated Statement of Financial Condition 3 4Q07 Level 3 assets included investments in funds at NAV, 3Q7 excludes these funds 3

5 Goldman Sachs Credit Profile Credit Ratings as of September 30, 207 Fitch Moody's S&P Goldman Sachs Group Inc. Short-term Debt F P-2 A-2 Long-term Debt A A3 BBB+ Subordinated Debt A- Baa2 BBB- Preferred Stock BB+ Ba BB Ratings Outlook Stable Stable Stable Goldman Sachs Bank USA Short-term Debt F P- A- Long-term Debt A+ A A+ Short-term Bank Deposits F+ P- N/A Long-term Bank Deposits AA- A N/A Ratings Outlook Stable Stable Stable Goldman Sachs International Bank Short-term Debt F P- A- Long-term Debt A A A+ Short-term Bank Deposits F P- N/A Long-term Bank Deposits A A N/A Ratings Outlook Stable Stable Stable Goldman Sachs & Co. Short-term Debt F N/A A- Long-term Debt A+ N/A A+ Ratings Outlook Stable N/A Stable Goldman Sachs International Short-term Debt F P- A- Long-term Debt A A A+ Ratings Outlook Stable Stable Stable Preferred Stock includes Group Inc. s non-cumulative preferred stock and the Normal Automatic Preferred Enhanced Capital Securities (APEX) issued by Goldman Sachs Capital II and Goldman Sachs Capital III 4

6 Diversified Net Revenue Mix Diversified by Business Average Diversified by Geography Average Investing & Lending 5% Investment Banking 6% Asia 6% Investment Management 6% FICC Client Execution 30% EMEA 26% Americas 58% Securities Services 5% Commissions and Fees 9% Equities Client Execution 9% Our goal is to continue to have leading, diverse franchise businesses 5

7 Financial Performance Net Revenues ($bn) Net Earnings ($bn) & ROE (%) $46.0 $ % 32.8% $37.7 $39.2 $34.2 $34.2 $34.5 $33.8 $30.6 $28.8 $.6 $9.5 $ % $22.2 $24.2 $8.4 $7.5 $8.0 $8.5 $7.4 $6..5%.0%.2% 0.7% $ % $ % 9.4% $ % 3.7% YTD YTD 2 Net Earnings ROE In connection with becoming a bank holding company, the firm was required to change its fiscal year-end from November to December. This change in the firm s fiscal year-end resulted in a one-month transition period. For the one-month ended December 2008, we reported net revenues of $83 million and a net loss of $780 million. ² 207YTD ROE of 0.3% calculated on an annualized basis. Includes $496mm reduction to provision for taxes as a result of the firm s adoption of the share-based accounting standard, resulting in an increase to diluted EPS of $.20 and annualized ROE by 0.9 percentage points 6

8 Our Risk Philosophy Internal Audit Firmwide Client and Business Standards Committee Revenue-Producing Units Chief Executive Officer Presidents/Co-Chief Operating Officers Chief Financial Officer Chief Risk Officer Corporate Oversight Board of Directors Board Committees Senior Management Oversight Chief Executive Officer Presidents/Co-Chief Operating Officers Chief Financial Officer Committee Oversight Management Committee Firmwide Risk Committee Controllers Independent Control and Support Functions Compliance Conflicts Chief Risk Officer Legal Human Capital Management Operations Tax Technology Treasury Credit Risk Management Firmwide Enterprise Risk Committee Liquidity Risk Management Market Risk Management Model Risk Management Operational Risk Management Senior management awareness of nature and amount of risk incurred Independence of process from the business Fair value accounting is a critical risk mitigant and is supported by a robust price verification process Minimize losses and manage risk through: Active management Risk mitigation, where possible using collateral Diversification Return hurdles matched to underlying risks Overall risk tolerance established by assessment of opportunity relative to potential loss Qualitative and quantitative analysis, but not a specific formulaic link Variety of approaches used to monitor risk exposures Effective risk systems, which are thorough, timely and flexible While we manage risk conservatively, we are in a risk-taking business and will incur losses 7

9 Managing Our Risk 4Q07 3Q7 Balance Sheet $,20bn -7% $930bn Common Equity $40bn.9x $75bn Gross Leverage 26.2x -59% 0.8x GCLA $6bn 3.6x $220bn Level 3 Assets 2 Down by more than 50% since 4Q07 Prior to 4Q09, GCLA reflects loan value and subsequent periods reflect fair value 2 4Q07 Level 3 assets included investments in funds at NAV, 3Q7 excludes these funds 8

10 Balance Sheet Overview Highly liquid balance sheet with ~97% of our assets marked to market or carried at amounts that approximate fair value as of 3Q7 As of 3Q7, greater than 90% of the balance sheet was comprised of more liquid assets (e.g., cash, reverses/borrows, U.S. government/agency and other financial instruments) Businesses are subject to conservative balance sheet limits that are reviewed and monitored. In addition, aged inventory limits are set for certain financial instruments 3Q7 Balance Sheet Allocation² Other Assets 3% Balance Sheet² Mix Change: 4Q3 to 3Q7 ($bn) $9 $930 $22 $29 $6 $6 Investing & Lending 3% GCLA and Cash 25% $375-7% $348 Institutional Client Services 37% Secured Client Financing 22% -22% $263 $ % $90 $23 4Q3 3Q7 GCLA and Cash Secured Client Financing Institutional Client Services Investing & Lending Other Assets Excludes Level 3, other assets and investments in funds at NAV ² The balance sheet allocation to our businesses is a non-gaap presentation, see the appendix for more information about this non-gaap presentation 9

11 Capital Update Shareholders Equity ($bn) Gross and Adjusted Leverage $ % $86.3 $.2 2.4x -3% 0.8x $6.2 $69.5 $ x 4Q2 Common Equity Structurally higher capital levels 3Q7 Preferred Stock We continue to manage our balance sheet to provide a solid financial foundation and meet client needs and regulatory requirements. Our equity base has meaningfully expanded and leverage has decreased significantly Taking a longer-term perspective, since 4Q07 we have seen significant strengthening of our capital base with common equity up.9x, while our gross leverage ratio has fallen by 59% Capital growth coupled with active balance sheet management leaves us well-positioned for capital requirements 4Q2 3Q7 Includes (i) Cash and Cash Equivalents, (ii) Collateralized Agreements, and (iii) Financial Instruments Owned, at fair value segregated for regulatory and other purposes Adjusted leverage is a non-gaap measure, see the appendix for more information about this non-gaap measure 0

12 Capital Ratios 3Q7 Transitional CET Ratios 3Q7 Standardized RWAs ($540bn) 3Q7 Basel III Advanced RWAs ($600bn) 3.3% 9.5% 2.0% 2.5% 2.5% 7.0% 7.0% Estimated G-SIB Surcharge 2 Est. Fully Phased-in Regulatory Requirement in 209 Market Risk 5% Credit Risk 85% Operational Risk 20% Market Risk 3% Credit Risk 67% Standardized Basel III Advanced Supplementary Leverage Ratio 3 Under the Standardized approach, our CET ratio as of 3Q7 was 3.3% on a transitional basis and 3.0% on a fully phased-in basis 4 4.2% 6.% Under the Basel III Advanced approach, our CET ratio as of 3Q7 was 2.0% on a transitional basis and.7% on a fully phased-in basis 4 As of 3Q7 our fully phased-in SLR of 6.% is compliant with the 208 requirements Q4 3Q7 Calculated on a transitional basis based on the Federal Reserve Board s final rules. 2 Based on the Federal Reserve Board s G-SIB final rule issued in July 205. Represents fully phased-in estimated G-SIB buffer based on 206 financial data. The buffer in the future may differ from this estimate due to additional guidance from our regulators and/or positional changes. 3 Q4 SLR is a non-gaap measure which reflects our best estimate based on the U.S. federal bank regulatory agencies April 204 proposal. See the appendix for more information about this non-gaap measure; 3Q7 SLR based on the U.S. federal bank regulatory agencies final rule. 4 The fully phased-in Basel III Advanced and Standardized capital ratios are non-gaap measures, see the appendix for more information about these non-gaap measures

13 Conservative and Comprehensive Liquidity Risk Management Excess Liquidity Asset-Liability Management Our most important liquidity policy is to pre-fund estimated potential liquidity needs in a stressed environment Our GCLA consists of cash and highly-liquid government and agency securities that would be readily convertible to cash in a matter of days GCLA size is based on: Modeled assessment of the firm s liquidity risks, including contractual, behavioral and market-driven outflows and intraday demands Applicable regulatory requirements Qualitative assessment of the conditions of the financial markets and the firm Long-term stress tests, which take a forward view on our liquidity positions through a prolonged stress period Conservative asset and liability management to ensure stability of financing Focus on size and composition of assets to determine appropriate funding strategy Secured and unsecured financing with long tenor relative to the liquidity profile of our assets in order to withstand a stressed environment Consistently manage overall characteristics of liabilities, including term, diversification and excess capacity Rigorous and conservative stress tests underpin our liquidity and asset-liability management frameworks 2

14 Liquidity Update We are focused on maintaining excess liquidity 3Q7 Average GCLA by Entity GCLA reflects ~24% of our balance sheet as of 3Q7 In 3Q7, over 80% of our average GCLA was made up of overnight cash deposits (which are mainly at the Federal Reserve), U.S. government obligations, and U.S. agency obligations, with the balance in high quality non-u.s. government obligations Our GCLA is held at Group Inc. and Goldman Sachs Funding LLC (Funding IHC) and each of our major broker-dealer and bank subsidiaries to ensure that liquidity is available to meet entity liquidity requirements Group Inc. and Funding IHC 6% Major Bank Subsidiaries 36% Major Broker- Dealer Subsidiaries 48% Average GCLA ($bn) We continually enhance the models that drive the size of our GCLA Our Modeled Liquidity Outflow reflects potential contractual and contingent outflows of cash or collateral $80 $88 +23% $2 $ x since 2007 Our Intraday Liquidity Model provides an assessment of potential intraday liquidity needs Our long-term stress tests take a forward view on our liquidity positions through a prolonged stress period Q7 Our average LCR exceeded the minimum requirement for the three months ended September 207 Prior to 4Q09, GCLA reflects loan value and subsequent periods reflect fair value 3

15 Asset-Liability Management We actively manage and monitor our asset base, with particular focus on liquidity and potential holding period Through our dynamic balance sheet management process, we use actual and projected asset balances to determine our funding requirements We conservatively manage the overall characteristics of our funding book, with a focus on maintaining long-term, diversified sources of financing with tenors appropriate for the anticipated holding period of our assets Our plans are reviewed and approved by the Firmwide Finance Committee as well as senior managers in our independent control and support functions As of 3Q7 % of Total Assets Equity and Long-term Debt Principal Sources of Funding Deposits GCLA and Cash 25% Secured Funding Financial Instruments Sold Secured Client Financing Institutional Client Services 22% 37% Investing & Lending 3% Other Assets 3% Total Assets $930bn 4

16 Diversification of Funding Sources As of 3Q7 Our secured funding ($22.3bn) book is diversified across: Counterparties Tenor Geography Term is dictated by the composition of our fundable assets with longer maturities executed for less liquid assets Non-GCLA secured funding WAM of >20 days Secured Funding 2% Deposits 22% Shareholders' Equity 4% Unsecured Long- Term Debt 35% Shareholders equity ($86.3bn) is a significant, stable and perpetual source of funding Unsecured long-term debt ($2.9bn) is well diversified across the tenor spectrum, currency, investors and geography WAM of ~8 years Deposits ($32.8bn) have become a larger source of funding with a current emphasis on retail deposit growth Approximately 25% of our deposits are brokered CDs with a 3-year WAM Unsecured Short- Term Debt 8% Unsecured short-term debt ($45.4bn) includes $27.3bn of the current portion of our long-term unsecured debt Comprised of collateralized financings from the Consolidated Statement of Financial Condition 5

17 Secured Funding Principles We manage our secured funding liquidity risk with: Extending initial trade tenors and managing maturities Term Pre-rolling and negotiating tenor extensions with clients Longer tenors targeted for less liquid assets 2 Diversity Raising secured funding from a diverse set of funding counterparties 3 Excess Capacity Raising excess secured funding to insure against rollover risk or growth in assets to finance 4 GCLA We raise excess unsecured funding and hold as GCLA to mitigate any 30-day modeled liquidity needs 5 Stress Tests Imposing stress test limits to ensure we do not have excessive liquidity risk even in a severe scenario Funding-at-Risk (FaR) uses a number of metrics over various time periods to evaluate the risks in the secured funding book Matched book (Cash gap) 6

18 Unsecured Funding We continue to emphasize diversification across tenor, currency, channel and structure Year-to-date, we have raised $42.3bn of GS Group long-term unsecured vanilla debt and preferred stock $40.3bn of senior benchmark notes $.5bn of perpetual preferred stock $0.5bn of non-benchmark senior and subordinated debt Benchmark issuance across the tenor spectrum included 2, 5, 6, 7, 8, 0,, 2, and 2-year maturities; as well as non-round tenors ~8 year WAM for the entire unsecured LT debt portfolio 207YTD GS Group Vanilla Issuance by Currency USD 7% EUR 23% CAD 3% AUD JPY % % CHF % NOK 0% Average Issuance / Maturities: 36% GS Group Long-Term Vanilla Issuance vs. Vanilla Maturities ($bn) $42.3 Scheduled Maturities $2.9 $29.2 $29.3 $7.4 $9.3 $2. $3.3 $24. $24.3 $2.3 $2.7 $5.3 $3.9 $3.7 $4.3 $9. $3.7 $7.3 $2.0 $5.3 $9.9 $7.5 $ Vanilla Debt Issuance Preferred Equity Issuance Maturity Q 2Q 3Q 4Q GS Group YTD issuance and GS Group upcoming maturity values for 207, 208, and 209 are as of October 27 th, 207, adjusted to include USD, CAD, and NOK benchmark issuances that settled on October 3st, as well as the preferred stock issuance that settled on November st. 207 maturities include the redemption of CAD 500mm subordinated debt in 2Q, the $.0bn subordinated debt tender in 2Q, and the $850mm preferred stock series I redemption in 4Q 7

19 Deposit Growth Deposit Growth Trends ($bn) 3Q7 Deposits: $32.8bn (22% of Funding Sources) Brokered Certificates of Deposit 25% Deposit Sweep Program 2% Private Bank and Online Retail 49% Institutional 4% Q7 Deposits U.S. Deposits International Deposits Deposits have become a larger source of funding and provide a diversified source of liquidity In particular, GS Bank USA has raised deposits with an emphasis on long-term CDs, private bank deposits and long-term relationships with broker-dealer aggregators that sweep their client cash to an FDIC-insured deposit at GS Bank USA ~68% of our U.S. deposits are FDIC insured as of 3Q7 Deposits have become a more meaningful source of the Firm s funding 8

20 Risk Management Policies Policies, limits and exposures reviewed regularly Multiple risk metrics used to monitor and manage exposures Extensive investment in our risk management groups Frequent reporting to / communication with Board and senior management Risk Overview Management Committee Oversight Controls & Active Management Market Risk Risk of loss due to changes in market conditions Set market risk limits and sub-limits at certain product and desk levels through delegated authority of Firmwide Risk Committee Firmwide Risk Committee is responsible for the ongoing monitoring and management of financial risks, approves risk limits framework, metrics and methodologies Risk Governance Committee (through delegated authority from the Firmwide Risk Committee) approves market risk limits and sub-limits at firmwide, business and product levels, consistent with our risk appetite Market Risk Management centrally manages market risk by producing risk measures and monitoring against established market risk limits Credit Risk Risk of loss related to failure of counterparties to fulfill financial and contractual obligations Set credit limits for counterparties, economic group, industry and country through delegated authority of Firmwide Risk Committee Firmwide Risk Committee reviews existing counterparty credit exposures and approves risk limits framework, metrics and methodologies Risk Governance Committee (through delegated authority from the Firmwide Risk Committee) approves credit risk limits at firmwide, business and product levels consistent with our risk appetite Credit Risk Management centrally manages and controls counterparty credit exposures through the establishment of limits approved by Risk Governance Committee and use of collateral and netting agreements 9

21 Risk Management Policies (cont d) Policies, limits and exposures reviewed regularly Multiple risk metrics used to monitor and manage exposures Extensive investment in our risk management groups Frequent reporting to / communication with Board and senior management Risk Overview Management Committee Oversight Controls & Active Management Liquidity Risk Risk that we will be unable to fund the firm or meet our liquidity needs during stress events Control and oversight of liquidity risk management framework, including stress testing and limits Firmwide Finance Committee approves liquidity risk limits at the firmwide level Liquidity Risk Management manages liquidity risk at the firm by reviewing liquidity risk measures and monitoring against liquidity risk limits approved by risk committees Operational Risk Risk of loss resulting from inadequate or failed internal processes, people and systems or from external events Set comprehensive risk policies, enforcing, monitoring and measuring performance through various benchmarks, and active participation Firmwide Operational and Conduct Risk Committee provides oversight of operational risk policies, framework and methodologies, and monitors the effectiveness of operational risk management Operational Risk Management centrally manages implementation of the framework and business-level managers actively manage and monitor exposures to operational risks Model Risk Potential for adverse consequences from decisions made based on model outputs that may be incorrect or used inappropriately Perform an independent review, validation and approval of models Firmwide Model Risk Control Committee has oversight of the development and implementation of model risk controls Model Risk Management is responsible for identifying and reporting significant risks associated with models 20

22 Market Risk-Related Metrics ($ in millions) 0% Sensitivity Table Average Daily VaR Asset Categories September 207 June 207 $8 $38 Equity $2,40 $2,99 Debt $,628 $,664 Total $3,768 $3,863 The size of the aggregate 0% sensitivity decreased by 28% from 4Q07 to 3Q7 $3 $89 $26 $20 $23 $32 $65 $86 $35 $26 $2 $23 $23 $76 $8 $20 $8 $ $5 $3 $37 $67 $62 $63 $7 $5 $6 $64 $22 $33 $7 $8 $5 $47 $24 $9 $9 $7 $9 $0 $2 $27 $22 $25 $26 $23 $2 $4 $45 $40 $44 $40 $38 -$03 -$86 -$58 -$53 -$5 -$46 -$49 -$40 -$43 -$39 -$33 4Q09 4Q0 4Q 4Q2 4Q3 4Q4 4Q5 4Q6 Q7 2Q7 3Q7 Interest Rates Equity Prices Currency Rates Commodity Prices Diversification Effect VaR is the potential loss in value of inventory positions, as well as certain other financial assets and financial liabilities, due to adverse market movements over a defined time horizon with a specified confidence level. We hold inventory primarily for market making for our clients and for our investing and lending activities 2

23 Appendix Non-GAAP Measures The fully phased-in Standardized and Basel III Advanced CET capital ratios are non-gaap measures and may not be comparable to similar non-gaap measures used by other companies. As of Q4, the supplementary leverage ratio was also a non-gaap measure as it was not a required regulatory disclosure at that time. We believe that these ratios are meaningful because they are measures that we, our regulators and investors use to assess our ability to meet future regulatory capital requirements. These ratios are based on our current interpretation, expectations and understanding of the revised risk-based capital and leverage regulations of the Federal Reserve Board, subject to certain transition provisions and may evolve as we discuss its interpretation and application with our regulators. For a further discussion of the methodology used to calculate the firm s regulatory ratios, see Note 20 to the condensed consolidated financial statements in Part I, Item Financial Statements (Unaudited) and Equity Capital Management and Regulatory Capital 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 0-Q for the period ended September 30, 207. In addition to preparing our condensed consolidated statements of financial condition in accordance with U.S. GAAP, we prepare a balance sheet that generally allocates assets to our businesses, which is a non-gaap presentation and may not be comparable to similar non-gaap presentations used by other companies. We believe that presenting our assets on this basis is meaningful because it is consistent with the way management views and manages risks associated with the firm s assets and better enables investors to assess the liquidity of the firm s assets. For a reconciliation of this balance sheet allocation to our U.S. GAAP balance sheet, see Balance Sheet and Funding Sources 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 0-Q for the period ended September 30,

24 Appendix Non-GAAP Measures, continued Adjusted leverage equals total assets excluding (i) cash and cash equivalents, (ii) collateralized agreements and (iii) financial instruments owned, at fair value segregated for regulatory and other purposes divided by total shareholders equity. This ratio is a non-gaap measure and may not be comparable to similar non-gaap measures used by other companies. We believe that this ratio is a more meaningful measure than gross leverage because it excludes certain low-risk assets. The table below presents the reconciliation of total assets to total assets excluding (i) cash and cash equivalents, (ii) collateralized agreements and (iii) financial instruments owned, at fair value segregated for regulatory and other purposes and adjusted leverage. As of September 207 $ in millions Total assets $ 930,32 Less: Cash and cash equivalents (6,60) Collateralized agreements (300,926) Financial instruments owned, at fair value segregated for regulatory and other purposes (4,554) Total $ 498,042 Total shareholders' equity $ 86,292 Adjusted leverage 5.8 x 23