The new Republican tax reform law will likely take a bite out of big banks' bottom lines — at least at first.
Goldman Sachs told investors it's anticipating a $5 billion hit to its fourth-quarter earnings thanks to the tax bill. For reference, the bank's pre-tax earnings were just under $3 billion last quarter, so a $5 billion tax penalty could put the company in the red for the fourth quarter.
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The cost mostly comes from the billions of dollars in profits Goldman has stored overseas. The U.S. wasn't previously taxing that money until it entered the country — but the Republican tax law now adds a 15 percent tax on cash and liquid assets held anywhere in the world.
Other banks have estimated they'll take substantial hits as well. Citigroup says it could pay as much as $20 billion from the bill.
But analysts are still bullish on tax reform, despite the initial cost. A steep cut in the corporate tax rate and an end to taxation of profits U.S. companies make overseas are expected to more than make up the difference.
