Morgan Stanley To Be Hit With $1.25 Billion Charge From Republican Tax Reform

Morgan Stanley prepares for a one-hit charge of $1.25 billion from the new tax reform.

Financial service firm, Morgan Stanley, will be reportedly hit by a $1.25 billion charge in the fourth-quarter of 2018 as part of the recent Republican tax cut. Morgan Stanley is not the first company to be destabilized by the reform.

According to a recent filing, the bank blamed US tax code changes, which were signed into law by President Donald Trump a few days before the holidays. The tax reforms would lead to a gross charge of approximately $1.4 billion, in part for the remeasurement of deferred tax assets. Morgan Stanley expects the net hit to be about $1.25 billion.

Morgan Stanley along with several other US companies who have been affected by the tax reform will shake off the one-off hit once the positive effects of the bill emerge.

Several other banks, including Wells Fargo and Western Alliance Bancorp, already took advantage of the windfall cash and announced they would raise the minimum-wage of their workforce. Analysts at financial service company, Credit Suisse, have bumped 8 percent to this year’s estimates of earnings per share.

Morgan Stanley joined Goldman Sachs, Bank of America and Citigroup who have also put out rough estimates of the new tax reform on their fourth-quarter results.

Bank of America announced prior to the holidays that it would take $3 billion hit mostly from deferred tax assets that had a lower value. Citigroup, on the other hand, expects a hit of approximately $20 billion, consisting of $16 billion in deferred asset write-downs and what’s left for adjusting to the new bill. Goldman Sachs expects to take a $5 billion charge while accommodating to the reform.

The first-quarter earnings seasons will kick off with JPMorgan Chase and Wells Fargo, on January 12.

According to the Joint Committee on Taxation, the accumulated earnings of the one-time hit are expected to raise $339 billion in federal revenues over the next ten years.

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