Goldman Sachs reports 4Q loss on big charge for US tax reform

AFP: Goldman Sachs reported a rare quarterly loss yesterday due to a one-time charge associated with US tax reform.

Performance across operating division was mixed, although the bank’s profits topped analyst expectations when the effect of the one-time item was excluded. The company’s shares fell in early trading.

The US investment banking giant reported a fourth-quarter loss of US $ 2.1 billion, compared with a profit of US $ 2.2 billion in the year-ago period.

Revenues in the fourth quarter fell 4.1 percent to US $ 7.8 billion.

Goldman’s first in a quarterly loss since 2011 was driven by US $ 4.4 billion in one-time charges, mostly due to US tax reform provisions on the repatriation of foreign earnings. The bank warned of the hit in December.

The charge also weighed on annual earnings, which fell 48 percent to US $ 3.7 billion.

Numerous large companies have made similar announcements of one-time negative effects from US tax reform in recent weeks.

But most, including Goldman Sachs, are bullish on the long-term effects of the US tax cuts, arguing they will lead to increasing revenues and faster economic growth.
Goldman Sachs Chief Executive Lloyd Blankfein alluded to the tax cuts as a factor in an improving macro environment, in spite of the “challenging environment for our market-making businesses,” according to a Goldman press release.

“With the global economy poised to accelerate, new US tax legislation providing tailwinds and a leading franchise across our businesses, we are well positioned to serve our clients and make significant progress on the growth plan we outlined in September,” Blankfein said.

In its bank operations, Goldman scored impressive gains in revenues from both debt and equity underwriting. Financial advisory revenues also increased.
On the downside, Goldman’s performance in its trading division, which has struggled in recent quarters amid low volatility, turned in another weak performance.
Revenues in this division slumped 34 percent from the year-ago period, weighed down especially by a 50 percent plunge from the closely-watched fixed income, commodities and currency trades.

As Goldman’s trading business has languished, it has made moves into banking for the public, an area dominated by rivals such as JPMorgan Chase and Bank of America and regional banks.

The online consumer lending and deposit platform Marcus originated more than US $ 2 billion in loans and drew more than US $ 5 billion in deposits last year, Goldman said.

Shares of Goldman Sachs fell 2.2 percent in early trading Wednesday to US $ 252.75.