Goldman Sachs expects to take a $5 billion charge to its fourth-quarter earnings as a result of the tax bill President Trump signed into law last week, the bank said in a regulatory filing.
It is a one-time blow for Goldman. The benefits of the law’s tax cuts — including a reduction of the corporate income tax to 21 percent from 35 percent — will be much longer lasting.
Two-thirds of the estimated $5 billion charge comes from Goldman’s paying taxes on assets it holds overseas.
Another portion stems from the bank tinkering with its balance sheet, including by adding new assets, in order to maximize the long-term benefits that it will derive from the lower corporate tax rate — the latest illustration of how companies are reshaping their structures and finances to fully take advantage of the new, lower tax rates.
Under the new tax law, companies will no longer be able to entirely avoid taxes on overseas holdings. But the tax they pay on those assets will drop to a rate between 8 percent and 15.5 percent from 35 percent.
In recent weeks, Goldman’s competitors have also estimated one-time hits to their earnings because of the tax law. 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.