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Donald Trump’s new tax law is hurting investment banks such as Jefferies: here’s how

Similar to many other US banks, investment bank Jefferies Group LLC clocked a quarterly loss, hurt by a $164 million charge related with the changes to the US tax code.

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US President Donald Trump. (Reuters)

The latest changes in the US tax regime brought about by Donald Trump administration are hurting investment banks. Similar to many other US banks, investment bank Jefferies Group LLC clocked a quarterly loss, hurt by a $164 million charge related with the changes to the US tax code, Reuters reported. After the new tax code came into existence, these financial institutions had to allocate one-time adjustments to the account for the new tax code. However, the lower corporate tax rates are most likely to boost future profits, experts believe. Most of the American banks are scheduled to report first-quarter earnings in the coming month.

In the first quarter that ended February 28, the banking revenue of Jefferies surged 7.8 percent year-over-year to $440 million, Reuters reported citing Jefferies. The revenue from the asset management business plunged 38.2 percent to $4.9 million. The non-interest expenses soared 4 percent to $699 million, the report said. A net loss of $60.8 million was reported by the Jefferies against a profit of $114 million it made a year earlier. A net earnings of $103 million would have been reported if tax-related charges were excluded. The net revenue of the investment bank climbed 3.2 percent to $821.2 million.

New tax code

The new US tax code sets 21 percent as against 35 percent tax rate for the corporates. Before this, the American tax rate was the fourth highest in the world. The European countries average 18.35 percent, as per the Tax Foundation. The US administration believes that by cutting taxes to the tune of by $1.5 trillion over the next decade, the growth rate of US GDP will increase. In his speech on December 13, US President Donald Trump said that the new tax code will create more jobs and provide massive relief to the families and companies based out of America.

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First published on: 20-03-2018 at 17:58 IST
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