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Goldman Sachs Says New Tax Law To Cut Q4 Earnings By $5 Bln


Goldman Sachs Group Inc. (GS) said Friday that the new tax law signed by U.S. President Donald Trump last week will reduce its earnings for the fourth quarter and year ending December 31, 2017 by about $5 billion.

The U.S. tax reform bill, known as the Tax Cuts and Jobs Act, was enacted on December 22, 2017. The tax legislation will lower the corporate income tax rates to 21 percent from 35 percent and also impose a repatriation tax on deemed repatriated earnings of foreign subsidiaries.

In a filing with the U.S. Securities and Exchange Commission, Goldman Sachs noted that about two-thirds of the $5 billion decrease in earnings is due to the repatriation tax.

The remainder includes the effects of the implementation of the territorial tax system and the remeasurement of U.S. deferred tax assets at lower enacted corporate tax rates.

However, the company added that the impact of the tax legislation may differ from this estimate, possibly materially, due to changes in interpretations and assumptions made by it, guidance that may be issued and actions the company may take as a result of the tax legislation.

Goldman Sachs plans to announce its fourth-quarter financial results on Wednesday, January 17, 2018.

On average, analysts polled by Thomson Reuters expect the company to report earnings of $5.1 per share for the fourth quarter on revenues of $7.72 billion. Analysts' estimates typically exclude special items.

Other major banks too have warned that the tax reforms will have a negative impact to their earnings in the short term.

British lender Barclays Plc (BARC.L, BCS) has said it expects the measurement of its U.S. deferred tax assets or DTAs to reduce by about 1 billion pounds and also result in an associated one-off charge of about 1 billion pounds to its full-year Group profit after tax following the implementation of the reduced tax rate.

Swiss banking giant Credit Suisse AG (CS) has said it expects to write down the value of its U.S. deferred tax assets by about 2.3 billion Swiss francs in the fourth quarter of 2017, following the enactment of the tax bill.

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