Goldman Sachs (GS) said Friday that it will book a $5 billion charge against its fourth quarter earnings linked to the Republican-led overhaul of the U.S. corporate tax code.
Goldman said in a Securities and Exchange Commission filing that most of the charge -- around two thirds -- will be linked to the repatriation of cash held in some of its overseas divisions while "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."
"The impact of the Tax Legislation may differ from this estimate, possibly materially, due to, among other things, changes in interpretations and assumptions the firm has made, guidance that may be issued and actions the firm may take as a result of the Tax Legislation," Goldman added.
The bank said it will host a conference call after it publishes its fourth quarter and full year results on Jan. 17.
Goldman shares closed at $256.50 each in New York Thursday after rising 0.21% on the session. The stock, which is a component of the Dow Jones Industrial Average, has risen 7.12% this year.
The announcement follows similar estimations from European banking groups, including Credit Suisse Group AG (CS) and Barclays plc (BCS) , which cautioned investors earlier this week that while they are likely to see significant gains from the $1.5 trillion overhaul of U.S. corporate and individual tax rates passed by Republican lawmakers on Dec. 22, the impact may hit the value of current deferrals that sit on their balance sheets.
Credit Suisse will take an Sfr2.3 billion ($2.3 billion) charge, the bank said, although it stressed that "the write-down is a one-time accounting adjustment and has a minimal impact on Credit Suisse's strong regulatory capital position."
The bank said it expects the reforms "will have a positive impact on the US economy and our activity levels in the US, in particular with regard to our investment banking activities in advisory and underwriting."
Barclays said it will book a £1 billion ($1.34 billion) hit to its full-year profits thanks to its deferred tax adjustment writedown, the bank said, but forecast that the "reduction in the statutory US federal rate is expected to positively impact Barclays' future US after tax earnings."
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