Profits at Goldman Sachs and Bank of America hit by tax charge

Banks booked charges of €6.5bn on the back of Trump’s reform of corporate tax code

Goldman Sachs is one of a number of Wall Street banks that have taken big charges because of Trump’s new tax law. Photograph: David Gray/Reuters

Goldman Sachs is one of a number of Wall Street banks that have taken big charges because of Trump’s new tax law. Photograph: David Gray/Reuters

 

Goldman Sachs on Wednesday posted its first quarterly loss in six years on a huge tax charge but adjusted profit trumped analysts’ estimates, as strength in the investment banking business cushioned the blow from a slump in trading.

Rival Bank of America saw its quarterly profit nearly halved due to tax-related charges, though net income excluding that hit topped estimates and management promised the new US tax system would eventually benefit shareholders.

Goldman and rivals have faced weaker trading markets but the bank has suffered the most because its fixed income, commodities and currency unit continues to weigh on results. The unit had a 50 per cent drop in revenue – its worst quarter since the financial crisis.

The bank booked a charge of $4.4 billion (€3.59 billion) from the sweeping tax code changes enacted by US president Donald Trump, pushing it to a loss of $2.14 billion or $5.51 per share in the fourth quarter ended December 31st. A year ago, the bank earned $2.15 billion or $5.08 per share.

Excluding the one-off charge and other items, Goldman recorded earnings per share of $5.68. Analysts expected $4.91 cents per share, according to Thomson Reuters.

Revenue from investment banking – which includes fees from IPOs, underwriting and M&A advisory – rose 44.1 per cent to $2.14 billion, on strong debt and equity underwriting.

Revenue, including net interest income, fell 4.1 per cent to $7.83 billion, but beat average estimates of $7.61 billion.

Bank of America, the second-largest US bank by assets, booked a $2.9 billion charge related to the tax overhaul, which dragged its net income down to $2.37 billion. The bank announced the expected tax hit late last year.

Excluding that charge, it earned $5.3 billion, or 47 US cents per share, topping analysts’ estimate of 44 cents. Net interest income rose more than 11 per cent to $11.46 billion, helped by the three Federal Reserve rate hikes in 2017.

Revenue rose at three of its four businesses, pushing total revenue up about 2 percent to $20.69 billion. – Reuters