Goldman posts first quarterly loss in 6 years on tax hit; trading slumps

Goldman Sachs Inc 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.

(Reuters) – Goldman Sachs Inc 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.

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

FICC revenue was hurt by lower net revenue from currency, credit and interest rate products and commodities.

The bank booked a charge of $4.40 billion from the sweeping tax code changes enacted by President Donald Trump, pushing it to a loss of $2.14 billion or $5.51 per share in the fourth quarter ended Dec. 31. A year-ago, the bank earned $2.15 billion or $5.08 per share. bit.ly/2Ba6H9f

Shares were down about 1 percent at $255.75 in premarket trading.

Goldman joins other Wall Street banks that have taken big charges because of the new tax law. JPMorgan on Friday said it took a 37 percent hit to quarterly profit due to a $2.4 billion charge, while Citigroup flagged a $19 billion write-down, and posted a $18-billion quarterly loss on Tuesday.

Goldman Sachs had said a big chunk of the charge would be from the repatriation of taxes – the cost of moving money from foreign countries to the U.S.

Citi, JPMorgan and Goldman have trillions of dollars stored away overseas. The new law encourages companies to repatriate that money and slaps a mandatory tax of 15.5 percent on cash and liquid assets, or 8 percent on illiquid assets, regardless of whether the earnings come home or not.

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 I/B/E/S estimate.

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

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

Total operating expenses fell 1 percent to $4.73 billion.

Reporting By Aparajita Saxena in Bengaluru; Editing by Bernard Orr

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