Goldman Sachs Net Earnings Hit By US Tax Law Change; Investment Management Revenues Gain

Tom Burroughes Group Editor 19 January 2018

Goldman Sachs Net Earnings Hit By US Tax Law Change; Investment Management Revenues Gain

The investment and banking group reported a mixed set of figures, with stronger investment management results but also a fall in forms of trading revenues.

Goldman Sachs has reported net revenues of $32.07 billion in 2017, up from $30.608 billion a year ago, while net earnings fell to $3.685 billion from $7.087 billion because of the impact of newly enacted US tax laws forcing the US-listed firm to set aside more money to tax bills covering the effect of bringing overseas earnings back to the US.

During the fourth quarter of 2017, the firm recorded $4.40 billion of income tax expense related to tax legislation that will see the US corporate rate slide to 21 per cent from 35 per cent. A number of other firms, such as Citigroup and JP Morgan have reported one-off costs from the adjustment. However, when this cost is excluded, diluted earnings per common share were $19.76 and return on equity rose by 10.8 per cent last year, it said.

The effective income tax rate for 2017 was 61.5 per cent, up from 22.6 per cent for the first nine months of 2017 and up from 28.2 per cent for full year 2016.

Investment management generated record net revenues of $6.22 billion, including record management and other fees. Assets under supervision increased 8 per cent from a year ago to a record $1.49 trillion, with net inflows in long-term assets under supervision of $42 billion.

However, trading revenues in the critical fixed income, currencies and commodities segment fell 50 per cent from a year ago; the result appeared, media reports say, to spook investors, sending the share price down about 2 per cent in the hours after the results statement came out.


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