Morgan Stanley to Take $1.25 Billion Hit for U.S. Tax Revamp

Updated on
  • Charge of about $1.4 billion mostly from deferred tax assets
  • Citigroup, JPMorgan have warned of similar blows to earnings
Goldman Sachs to Take One-Time $5 Billion Tax Hit

Morgan Stanley said it will take a roughly $1.25 billion hit to earnings in the fourth quarter, becoming the latest bank to detail how profit will be hurt in the near term by the U.S. tax overhaul driven by President Donald Trump.

The drag on net income consists of a charge of about $1.4 billion, primarily from writing down its U.S. deferred tax assets, the company said in a filing Friday. That’s being offset by a gain of about $160 million related to a multiyear tax examination. The estimated tax provision is based on assumptions made by the firm and may change as it receives additional clarification, it said.

Trump last month signed into law Congressional Republicans’ tax overhaul, his first major legislative victory. The move slashes the corporate-tax rate to 21 percent from 35 percent, a cut that could benefit some banks. The plan also offers some temporary breaks for other types of businesses and individuals.

Short-Term Pain

Banks will have to take accounting charges because of changes to U.S. tax law

Source: Regulatory filings, estimates from bank executives

*Based on earlier versions of the tax bill

While banks will benefit from the lower rate, the new law requires charges in the near-term as foreign earnings face taxation and the value of deferred tax assets declines. Goldman Sachs Group Inc. revealed last week that its earnings would be crimped by about $5 billion, mostly from the repatriation tax, while Bank of America Corp. announced a $3 billion charge.

Citigroup Inc. has said it expects a hit of as much as $20 billion, mostly from writing down its DTAs. That was under an earlier version of the plan. JPMorgan Chase & Co. and Capital One Financial Corp. have warned that tax changes could hit their earnings.

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