Goldman Warns Tax Reform Will Slash Its Q4 Earnings By $5 Billion

Goldman Sachs warned on Friday that it expects a $5 billion hit to Q4 earnings as a result of tax reform signed by President Donald Trump on Dec. 22, approximately two-thirds of which is due to the repatriation tax.

As part of the GOP tax reform, a "repatriation tax” which allows companies to bring cash and assets held overseas to the U.S. by paying a one-time tax ranging from 8% on illiquid assets to 15.5% on cash and cash equivalents. It was introduced to encourage US companies to bring their vast overseas cash piles back home. In the 8-K, Goldman also said that 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 disclosure means the bank could post a steep loss for the quarter, albeit one driven by one time charges. Analysts expected Goldman's Q4 earnings to hit $2.08 billion.

The repatriation tax "holiday" will allow Apple to bring back much if not all of its $252.3 billion foreign cash pile without a major tax hit - a long-standing company goal, while drugmaker Amgen last Friday also said it expects to incur tax expenses of $6 billion to $6.5 billion over time as it repatriates cash it has accumulated around the world because of the new law.

As the FT notes, Goldman is one of the first US companies to publicly estimate the impact of the new repatriation tax on its earnings, and adds that given that the US tax reform was led by Steven Mnuchin and Gary Cohn, the former Goldman executives who are now senior figures in the Trump administration, its impact on the influential investment bank was always going to be closely watched.

Ironically, in an analysis by none other than Goldman, the bank said that - drumroll - banks would be among the biggest beneficiaries from the sweeping changes to the US tax code that were signed into law by Mr Trump a few days before Christmas.

Several big banks — such as Bank of America and Barclays — have already warned that the tax changes will lead to a multibillion-dollar reduction in the accounting value of their deferred tax assets.

Goldman, which is due to report fourth-quarter results on January 17, said: “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.”

Comments

Endgame Napoleon troubadourcapital Dec 29, 2017 10:12 AM Permalink

I bet it will not mean a boon for tellers, nor a raise for call center employees. They will still need unearned income from spouses or government for womb productivity. 

Wonder if Bank of America’s employees are getting a $1-per-hour pay raise. I know my insurance customers complained about them a lot, and to troubleshoot their payment issues, I had to make a lot of calls, using their crappy automated system. I could usually get to a manager by tricking the system with a bunch of X’s and Os. But seeing all of that, I prefer my locally owned bank.

Wells Fargo said it was raising even its “minimum wage” employees to $15 per hour. Good, but around here, their youthful retail bankers, with their finance degrees, are making the big $14k. At least, Wells does hire some college grads who jumped through all those educational hoops, often for nothing in the case of most so-called “real jobs.”

Who are their minimum-wage employees? In other parts of financial services, like retail insurance, back-office insurance work and credit processing, they outsource the janitorial services. 

And the pay for janitors hired through temp agencies is not much lower than what the insurance industry and credit-processing companies pay the vast majority of their rarely degree holding and [sometimes/often not] licensed staff—i. e. between $9 and $12 per hour.

Not that janitorial services should fetch a low wage. That is one of those jobs most people do not want to do and should command a wage that reflects that fact. 

Here is how the insurance industry handles it:

In the larger-scale insurance workplaces, outside of the actuaries, most of the salaried, non-pyramidal, non-straight-commission, non-1099 employees with benefits are not degree holders and, amazingly, not licensed, even in areas where sales are done.

Yet, licensed agents are told those licenses are a legal, costly, time-consuming state requirement that must be renewed biannually through more testing and more expense.

There is no telling how many college grads have gone through this scam process, paying for costly licenses they never used at all. I saw several non minorities from my government job training class at the Department of Human Services in the insurance classes. I bet I was the only one who even worked in the industry for a few years. A temp agent also told me, [bitterly], when submitting my name for a mom-dominated inside claims job that she knew I would not get, you could do it. She had tried herself, no doubt, encountering the same mom gangs that I have seen in these jobs. About about the insurance-licensing scam machine, she said: I went through the whole thing.

That industry and the government, with its bogus licensing process, makes a lot of money off of the perception that insurance sounds like a serious, living-wage employment option. For licensed people, it is mostly a straight-commission job with multiple expenses, no health insurance and twice-as-high SS tax. About 10 people that you do not know take a cut out of each sale in a pyramid system, and when policies cancel due to clients who cannot afford the premiums, the straight-commission salespeople are charged back the amount. Do not expect the CSR moms who leave at 2:30 every afternoon, and for weeks of baby travel soccer, to energetically work to keep your policies on the books. The 99% moms who are retained mostly do not work hard; they leave the office constantly when paying customers are lighting up the phone lines. 

On the whole, the industry prefers the unlicensed absentee mom gangs, as they have money coming in from spouses, ex spouses or monthly welfare that covers their rent and groceries and child tax credits up to $6,444 and, thus, do not need higher pay.  

Whether in underwriting or in sales-related service work, the wages of the vast majority of mom-gang employees are rock-bottom, ranging from $9 to $11 per hour. This applies to other financial services, too, not just insurance, but at least, the others do not have the licensing scam. 

You’ll get a ton of excused time off in the crony-mom-staffed, non-retail jobs if your womb has been productive. But you better have that sex-and-reproduction money to cover rent and groceries. You better have a spousal second income, a child support check or welfare and child tax credits up to $6,444. And you will: The many “voted-best-for-working-moms” workplaces in financial services hire / retain few who lack that unearned income for womb productivity. 

The state needs to print out licenses for womb productivity for the moms to present in the family-centric job interviews.

Womb Producer License #3568433 — you’re hired, and you’ll never hear the words you’re fired, no matter how many days, mornings, afternoons and weeks you take off for kids beyond your PTO and multiple pregnancy leaves, not unless you are absentee all day / every day in a management job.

But there is one catch: the pay is between $9 and $10 per hour.

This is why I am not enthusiastic about the big tax cut for corporations, the $24-per-paycheck tax cut for imdividuals who lack unearned income for womb productivity and must pay all bills on earned-only income and more non-refundable child tax credits and refundable child-tax-credit welfare up to $6,444 for the frequently absentee, openly discriminatory and above-firing, childbearing-age moms. 

Never fear: these barracuda bully moms always hire / retain a couple of token grandmas for whatever reason........not so much for the baby-mommy-look-alike-bulletin-board-decorating contest. They dote on them during the tacky Christmas sweater contest, giving them the candy prize. The grandmas are part of the back-watching gangs, not usually taking off as much as the moms, but with womb loyalty. I have seen one grandma, with a Social Security check covering her rent and groceries, using the grand babies as an excuse to take as much time off as the retained mom gangs. Do not expect them to be motherly to you if you single, childless and come to work every day, staying the whole day and meeting the sales generation and account-retention numbers every month.

The manager may praise you for awhile, thinking it will inspire you to keep working hard, bumping the numbers up so that the manager’s bonus is high. They need a few churn-able hard workers to generate sales during their babyvacations and during the babyvacations of their mom-gang employees. But remember: managers can always churn more chumps. The important thing is to 1) have unearned income that makes low wages palatable and 2) to be a “culture fit” for the absentee-mom gang.

Coo and purr with the proper enthusiasm during the adult cubicle Easter egg hunt; this is always important. Do not fail to show up for the Family Day Picnic, but counterintuitively, it is fine not to show up for work frequently if it’s for kids.

Wonder why America’s productivity numbers are falling? 

It is a mystery.

  

 

In reply to by troubadourcapital

Greed is King Dec 29, 2017 8:29 AM Permalink

Poor Goldman, losing out on the taxpayer funded Q.E cash cow is terrible news, especially as the taxpayer cash cow has been milked so severely that it`s  now little more than skin and bones and can`t be screwed for very much more very much longer.

Ink Pusher Dec 29, 2017 8:37 AM Permalink

GS losses will be much bigger, they just conveniently omitted their projections for Q2 of 2019 so the bottom wouldn't fall completely out of their rusty bucket before they get a chance to fleece any last minute marks who didn't catch the play.

beyondtheprogramming Dec 29, 2017 8:59 AM Permalink

I know, let's just ask the blockchain to track the people who keep receiving rewards from all the corrupt-to-the-core institutions out there, then see where that gets us. Pitch forks at the ready?

MuffDiver69 Dec 29, 2017 9:24 AM Permalink

Certainly proves the money will be repatriated. Interesting article on the foreign banks holding this money being None to pleased on this site yesterday. This territorial tax reform and the lowering of Corporate rate has shook up the world and they are pissed. Any energy intensive business would be foolish to not seriously consider manufacturing here.

Honest Sam Dec 29, 2017 9:48 AM Permalink

Pertinent part:

"Could"

"One Time"

"Allows"

"Encourage"

No where does it say it is mandatory.

Lord Blankfein is just playing with narrative to keep his bigger bonuses, the fuck.

Spectre Dec 29, 2017 10:17 AM Permalink

"The repatriation tax "holiday" will allow Apple to bring back much if not all of its $252.3 billion foreign cash pile without a major tax hit"

 

I thought under the new tax plan bringing back funds costs you 10-15%, that would be a shit load of cash expense.....

Snaffew Dec 29, 2017 10:36 AM Permalink

GS says it's a $5 billion hit to earnings.  It will likely announce a surprise profit instead of this loss and the stock will soar.  It's GS after all...do you really think they will announce a steep hit in earnings to the public?  it's all a ruse---

hooligan2009 Dec 29, 2017 10:50 AM Permalink

seems to me that financial insitutions have had a tax holiday since the GFC and the corporate tax provisions contained in the newly released tax package brings that tax holiday to an end AND THEN taxes earnings at a lower rate going forward.

institutions like GS and C stating a "reduction in earnings" are crying wolf. they were carrying tax losses to offset current profits, that would otherwise be taxed at 35% - i.e. not paying any tax at all on the amount of losses carried forward.

time for these insitutions to "shit or get off the pot", invest in the US and pay the same taxes that the other 95% of corporate america has to pay.

(fucking vampire squids).

 

MrBoompi Dec 29, 2017 11:04 AM Permalink

What a crock of shit.  They've technically already "earned" this money.  GS just kept it where the US couldn't tax it.  They should pay the business rate at the time the profits were earned, but now they whine about having to pay half as much.  Sorry if I don't sympathize at all.