ZCZC
BCN-04
US-ECONOMY-EARNINGS-BANKING-GOLDMANSACHS
Goldman Sachs says US tax reform to cut earnings by $5 bn
NEW YORK, Dec 30, 2017 (BSS/AFP) – US banking giant Goldman Sachs said
Friday the recently-enacted US tax reform will cut its earnings this year by
about $5 billion, mainly because of a tax targeting earnings held abroad.
The tax reform package is expected to “result in a reduction of
approximately $5 billion in earnings for the fourth quarter,” the company
said in a statement.
“Approximately two-thirds of which is due to the repatriation tax.”
The one-time hit means a likely loss for the fourth quarter for the
banking group when it reports quarterly and annual earnings January 17.
Goldman Sachs reported net profits of $2.4 billion in the fourth quarter of
2016, while the annual total last year was $7.4 billion.
US President Donald Trump last week signed into law a sweeping overhaul of
the US tax code, in what was his first major legislative victory since taking
office nearly a year ago.
The measure is expected to boost corporate profits of banks and other
companies over the medium and long term by lowering the corporate tax rate to
21 percent from 35 percent.
However, several large corporations have signaled that the law will result
in a short-term hit on earnings repatriated from overseas. The reform taxes
these earnings at 15.5 percent on cash and equivalents and eight percent on
real estate and other illiquid assets.
Other large companies that have alluded to large one-time hits in the
fourth quarter include Credit Suisse, Barclays and Royal Dutch Shell.
Despite the impact of the repatriation tax, large companies have strongly
backed the tax reform, arguing it will boost growth in the long term.
Analysts are generally upbeat about the earnings prospects of large banks
heading into 2018 in the wake of US tax reform, as well as the Trump
administration’s moves to streamline bank regulations, higher Federal Reserve
interest rates and solid economic growth.
A note from CFRA Research earlier this month gave a “positive” outlook on
diversified banks, saying “the success of the banks passing the 2017 Federal
Reserve stress tests opens the door for improved shareholder return through
dividend increases and share repurchases.”
Shares of Goldman Sachs dipped 0.8 percent to $254.41 in early trading
Friday, the last trading day of the year.
BSS/AFP/MR/ 1149 hrs