American Express warned on Wednesday that US tax changes would hit its bottom line by $2.4bn and plunge it into losses for the fourth quarter.
In a filing American Express said the changes to US law meant earnings per share for the 2017 year would be below its $5.80 to $5.90 guidance range.
However, the company adopted an upbeat outlook, saying a reduction in US corporate tax would bring “significant ongoing benefit”.
President Donald Trump signed US tax reforms into law in December after finally receiving legislative approval amid fierce opposition from Democrats.
Among the provisions, the US top rate of corporation tax falls from 35% to 21%.
A short-term negative impact for American Express arises from the need to adjust deferred US tax assets and liabilities to the lower 21% rate and the new “repatriation tax” on the undistributed earnings of non-US subsidiaries.
However, the company should see a significant boost to its bottom line in future quarters as the reforms greatly reduce its effective tax rate.
“While the Tax Act will negatively impact earnings in the fourth quarter of 2017, the lower corporate rate is expected to be a significant ongoing benefit to us. Beginning in 2018, we anticipate an effective tax rate in the low twenties before discrete tax items,” said American Express.
Last week Goldman Sachs revealed it would incur a $5bn hit to fourth-quarter earnings due to the tax changes.