Goldman Sachs Sees $5 Billion Earnings Hit Ahead of New Tax Law

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In recent weeks, some of Goldman’s competitors have also estimated one-time hits to their earnings because of the tax law. During a Dec. 5 conference, JPMorgan Chase’s chief financial officer, Marianne Lake, said moving overseas funds back to the United States could cost the bank up to $2 billion. On Dec. 6, the Citigroup chief financial officer, John Gerspach, said Citi could be facing a $20 billion charge. Bank of America said in a Dec. 22 filing it could book a $3 billion charge in its fourth-quarter earnings.

Public companies are required to account for changes to tax laws during the quarter in which they are enacted, so even though the banks will not be sending checks to the Internal Revenue Service yet, their balance sheets must be adjusted to reflect what they will eventually owe.

Goldman’s own bank analysts estimated on Dec. 18 that in the long run, big banks’ per-share earnings would increase by 13 percent, on average, under the new system.

Investors took the news in stride. Goldman’s shares were down about 1 percent in recent trading, while broader stock market indexes were essentially flat.

Goldman cautioned in its filing late Thursday with the Securities and Exchange Commission that the actual earnings charge could differ significantly from its $5 billion estimate if the government issues new guidance on the applications of the law or if interpretations of the law’s components change.

Correction: December 29, 2017

An earlier version of this article misstated how the investment bank Goldman Sachs was recording assets on its balance sheet to comply with the new tax law. It was revaluing assets, not adding them, as a result of the new tax cuts.

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