Goldman Sachs posts nearly US$2B loss from new tax law

By Ken Sweet, The Associated Press | January 17, 2018 | Last updated on January 17, 2018
2 min read
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Goldman Sachs posted a US$1.93-billion loss in the fourth quarter, the investment bank said Wednesday, as the bank had to record more than US$4 billion in charges related to the new tax law. It was the bank’s first quarterly loss in more than six years. (All figures are in U.S. dollars.)

Goldman had a net loss of $5.51 a share, compared with a profit of $2.35 billion, or $5.08 a share, in the same period a year earlier. Excluding the one-time charges, however, the bank earned $5.68 a share, beating analysts’ estimates.

Like other banks, Goldman had to write down billions in assets impacted by the new tax law this quarter, resulting in the quarterly loss. It had $3.32 billion in charges related to foreign earnings now taxable under the law and $1.1 billion in charges for deferred tax assets it stockpiled after the financial crisis.

Read: See how Trump’s tax bill has affected two big banks

Firm-wide, net revenues at Goldman were $7.83 billion versus $8.17 billion a year earlier.

Trading down, investment banking up

Outside of the impact of the tax bill, Goldman’s results were hurt by a relatively weak performance on its trading desks, typically one of Goldman’s strongest businesses.

The segment inside Goldman that contains its trading operations had net revenues of $2.37 billion in the fourth quarter, down 34% from a year earlier. Fixed income, currencies and commodities trading net revenues were down by 50% from a year earlier.

The firm’s advisory businesses, however, made up for the weak performance in trading. Investment banking net revenues totalled $2.14 billion, up 44% from a year earlier.

The bank set aside less money per employee for compensation than it had in the past, likely due to the weak performance on its trading desks. Goldman Sachs’ pay structure relies heavily on giving annual bonuses to employees based on performance. So while compensation expenses in the full year rose to $11.85 billion, up 2% from a year earlier, Goldman said it had 6% more staff than it did a year ago.

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Ken Sweet, The Associated Press

Ken Sweet is a reporter with The Associated Press,  an American not-for-profit news agency headquartered in New York City and founded in 1846.