Citigroup Earnings Wiped Out by Tax Charge -- 2nd Update
January 16 2018 - 9:14AM
Dow Jones News
By Christina Rexrode
Citigroup Inc. said Tuesday that it lost $18.3 billion in the
fourth quarter, its earnings wiped out by a $22 billion charge
related to the new tax law.
While the law is expected to help Citigroup and other large U.S.
banks over time, it is obscuring this quarter for many with large
one-time costs. At Citigroup, that led to the largest quarterly
loss ever, which amounted to $7.15 per share.
The tax law also dampened the results of JPMorgan Chase &
Co. when it reported last week and is expected to hurt other banks
in the fourth quarter as well. But its effect will be deeper at
Citigroup, whose tax-related charges are expected to be among the
largest of any U.S. company this quarter.
Without the tax charge, the bank would have made $1.28 per
share, beating the $1.19 expected by analysts polled by Thomson
Reuters. In the quarter that ended a year ago, the bank earned
$3.57 billion, or $1.14 per share.
Revenue rose to $17.26 billion from $17.01 billion a year
ago.
The bank run by Chief Executive Michael Corbat already had
warned Wall Street about the impact of the tax law and the looming
loss, saying last month that it expected to take a hit of about $20
billion to profits this quarter. That was before the tax law was
completed.
The $22 billion tax hit reported Tuesday comes mostly from
writing down the bank's huge pile of deferred-tax assets. Those are
past tax credits and deductions that companies can use to defray
future tax bills. At the end of the third quarter, Citigroup had a
net of about $45.5 billion in deferred-tax assets that it is
working through. That is more than other banks because Citigroup
generated huge losses in the financial crisis.
About $3 billion of the $22 billion tax charge came from the
newly enacted, one-time charge on U.S. companies' overseas
earnings. Citigroup is more focused on overseas markets than some
of its peers.
Overall, 2017 was a relatively quiet year for Citigroup, missing
some of the missteps and scandals that had plagued it in the
past.
Mr. Corbat, the CEO since 2012, is focused on returning more
capital to shareholders and improving profitability metrics such as
return on equity. While there was no profit in the fourth quarter
because of the tax charge, on an adjusted basis, Citigroup said
return on equity came in at 6.5%. The bank said Tuesday that it
still expects to return $60 billion to shareholders through 2020, a
goal it laid out for investors in July.
Trading revenue, a profit engine for many of the biggest U.S.
banks, fell 19% to $2.9 billion from $3.6 billion a year ago. That
was in line with what Chief Financial Officer John Gerspach
predicted last month, when he said year-over-year trading revenue
would be down by a high-teens percentage. Last week, JPMorgan
reported a drop in trading revenue that amounted to 17% after
adjusting for one-time charges.
Quarterly profit at the consumer bank rose 9%, driven by the
Asia business. Profit at the institutional bank, which includes
trading and investment banking, fell 7%. Expenses were flat.
Citigroup has been investing heavily in its credit card unit,
including new rewards programs and marketing, and is facing
questions from investors who want to know when that will start
paying off. Revenue from Citigroup-branded cards in North America
increased 1% over the year.
Longer term, the tax changes are expected to create a windfall
for Citigroup and other banks by slashing the overall corporate tax
rate to 21% from 35%.
Write to Christina Rexrode at christina.rexrode@wsj.com
(END) Dow Jones Newswires
January 16, 2018 08:59 ET (13:59 GMT)
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