Morgan Stanley to take $1.25bn hit due to tax cuts
London — Morgan Stanley says it will take about a $1.25bn hit to earnings in the fourth quarter, becoming the latest bank to detail how profit will be hurt in the near term by the US tax overhaul driven by President Donald Trump.
The drag on net income consists of a charge of about $1.4bn, primarily from writing down its US deferred tax assets, the company said in a filing on Friday. That’s being offset by a gain of about $160m 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.
In December Trump signed into law a congressional Republicans’ tax overhaul, his first major legislative victory. The move slashes the corporate-tax rate to 21% from 35%, a cut that could benefit some banks. The plan also offers some temporary breaks for other types of businesses and individuals.
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 revealed last week its earnings would be crimped by about $5bn, mostly from the repatriation tax, while Bank of America announced a $3bn charge.
Citigroup has said it expects a hit of as much as $20bn, mostly from writing down its deferred tax assets. That was under an earlier version of the plan.
JPMorgan Chase and Capital One Financial have warned that tax changes could hit their earnings.