Bank of America to Give Employee Bonuses Following Tax Overhaul -- 3rd Update
December 22 2017 - 5:16PM
Dow Jones News
By Rachel Louise Ensign
Bank of America Corp. is giving $1,000 bonuses tied to the
tax-overhaul bill to more than half of its employees, making the
bank the latest company to announce such a perk since the
legislation passed this week.
By the end of the year, the Charlotte, N.C.-based bank plans to
give the one-time bonuses to employees who earn up to $150,000 a
year in total compensation, according to an internal memo from
Chief Executive Brian Moynihan reviewed by The Wall Street Journal.
About 145,000 employees will get the perk, the memo said. The bank
employs 210,000 people.
The tax legislation, signed by President Donald Trump on Friday,
includes a large cut in the corporate tax rate, which is expected
to significantly boost profits, especially for banks. Telecoms and
banks are among those expected to get a huge boost from the
overhaul because most of their operations are domestic and they pay
higher effective rates than firms in sectors such as
pharmaceuticals or technology, which have intellectual property or
operations outside the country.
Following the bill's passage, a number of companies announced
plans to share that windfall, at least in part, with employees.
AT&T Inc. and Comcast Corp. said they would pay a $1,000
bonus to most of their U.S. workers, more than 300,000 people
combined. The president signed the tax legislation on Friday.
Other banks have also announced pay increases since the tax bill
passed Congress. Wells Fargo & Co., PNC Financial Services
Group Inc., BB&T Corp. and Fifth Third Bancorp said they would
raise their minimum wage to $15 an hour. Bank of America already
pays its employees that minimum wage. Some of those banks are also
paying certain employees a one-time bonus similar to Bank of
America's.
Goldman Sachs Group Inc. analysts estimated in December that the
measures, which include a 21% corporate tax rate, would boost large
bank earnings by about 13% in 2018.
Some banks will, however, have to take a one-time hit to profits
from writing down what are called "deferred tax assets." These are
created by losses, in many cases huge ones racked up during the
financial crisis, and act as IOUs that can be used to offset future
tax bills. They will lose value due to the tax changes.
On Friday, Bank of America said in a filing that it will take a
one-time roughly $3 billion hit to profits in the fourth quarter
due to the tax bill, largely from the deferred tax asset
write-down. That amount was expected. Citigroup Inc. in early
December said it would take around a $20 billion hit to profits
from the version of the tax bills initially passed by Congress.
Write to Rachel Louise Ensign at rachel.ensign@wsj.com
(END) Dow Jones Newswires
December 22, 2017 17:01 ET (22:01 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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