Published: Wed, January 17, 2018
Economy | By Melissa Porter

Citi takes very big $22bn Trump tax hit but beats underlying earnings expectations

Citi takes very big $22bn Trump tax hit but beats underlying earnings expectations

JPMorgan Chase, the biggest United States bank, said on Friday it had taken $2.4 billion in one-time tax expenses, primarily for income earned overseas in the past.

Citigroup today announced a $18.3 billion loss in the fourth quarter, its worst quarter ever (and Citi has had a lot of bad quarters). It will also lead to higher profits and increased returns, said Citi CEO Michael Corbat.

In all, $19 billion of the massive charge was related to Citigroup's deferred tax assets, the largest amassed by any USA bank.

However, banks and other large USA corporations expect to benefit greatly from lower taxes and other provisions in the new law over the long term.

X Estimates: EPS to rise 4.4% to $1.19 as revenue grows 0.5% to $17.09 billion, according to Zacks Investment Research. The law will help lower the bank's tax rate from about 30 percent to 25 percent, potentially saving Citigroup billions over the next few years, industry analysts have said. The bank is also still on track to return $60 billion to shareholders through 2020.

Citigroup reported earnings of $1.28 a share for the final three months of 2017, excluding one-off items, compared with analysts' estimates of around $1.19.

Citigroup reported almost $17.26 billion in revenue for the fourth quarter, topping the $17.23 billion consensus forecast of Wall Street analysts surveyed by S&P Global Market Intelligence.

Revenue as a whole gained 1.4% to $17.26bn, slightly ahead of Wall Street forecasts for $17.22bn. A tax credit for deferred losses was reduced by $19bn for Citi, while it took another $3bn hit on profits held overseas, a key target of the Trump administration.

"Results could prove "good enough" this quarter", Instinet analyst Steven Chubak wrote in a note to clients. Equity markets revenue declined 23 percent, reflecting an episodic loss in derivatives of about $130 million related to a single client event.

Big-bank and financial earnings pick up steam this week, with Bank of America (BAC), Goldman Sachs (GS) and Charles Schwab (SCHW) set to release results Wednesday; Morgan Stanley (MS), American Express (AXP) and Keycorp (KEY) Thursday; and Synchrony Financial (SYF) Friday.

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