Citigroup Tuesday announced an enormous $22bn (£16bn) charge from Donald Trump’s tax changes which pushed the US bank to its first loss since 2009, but distracted from otherwise above-expectations results.
Banks with earnings overseas have been forced to account for a fundamental change to the way in which the US taxes profits. A tax credit for deferred losses was reduced by $19bn for Citi, while it took another $3bn hit on profits held abroad, a key target of the Trump administration.
However, Citi expressed confidence that the major cut to the headline corporate tax rate would create higher profits in the coming years.
Citi chief executive Michael Corbat said: “Tax reform not only leads to higher net income and increased returns, but also serves to strengthen our capital generation capabilities going forward.”
The bank reported a net loss of $18.3bn for the fourth quarter, but profits of $3.7bn after the non-cash tax charge was stripped out. That gave adjusted earnings per share of $1.28, well above the $1.19 consensus expectations.
Net income rose by four per cent for the quarter year-on-year on an adjusted basis, although revenues in Europe, the Middle East and Africa fell by eight per cent, offsetting stronger performances in Latin America and Asia.
Meanwhile the malaise from trading desks in the current low-volatility financial environment continued, with the institutional clients group – which includes investment banking – seeing revenues fall by one per cent year-on-year.
Global consumer banking was responsible biggest share of revenues, at $8.4bn in the quarter, as international revenues jumped by 11 per cent.
Shares on the New York Stock Exchange rose by more than 0.6 per cent at the time of writing to hit their highest point since the financial crisis, continuing a strong run of form which has seen US bank stocks surge since the start of 2016.
“Citigroup had after all a quarter much in keeping with the rest of rather a stolid year in big banking,” said Ken Odeluga, market analyst at City Index. “With rivals seeing similar softness however, investors look to differentiate less on the basis of trading revenues.”