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.
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.