Citigroup Takes a $22 Billion Tax Hit, but Sees Higher Profits Ahead

Posted January 16, 2018 1:06 p.m. EST

Citigroup said Tuesday that the new tax law would cost the banking giant $22 billion, resulting in a loss for the fourth quarter of 2017 and slightly reducing the amount of capital it has to protect against future losses.

But it could very well be the most inconsequential $22 billion charge in the bank’s history. Without it, Citigroup’s quarterly earnings and revenue exceeded analysts’ estimates. And the bank’s chief executive, Michael L. Corbat, told investors in a statement accompanying its earnings announcement that the tax overhaul would lead to higher profits in the future. The company’s stock rose in early trading on Wall Street.

Citigroup is the second major bank to reveal a one-time loss related to the new tax code. On Friday, JPMorgan Chase said adjusting to the new regime would cost it $2.4 billion.

Citigroup reported a net loss for the quarter of $18.3 billion. Excluding the tax charge, Citigroup’s quarterly profit was $3.7 billion, or $1.28 per share, compared to $3.6 billion, or $1.14 per share, for the same period in 2016. Analysts had expected the bank’s earnings per share to be $1.19.

Of the $22 billion tax charge, $19 billion came from lowering the value of assets on Citigroup’s books that the bank had planned to use to shield itself from taxes under the old, higher corporate tax rate. The top corporate rate under the new law will be lowered to 21 percent from 35 percent. Citigroup’s effective tax rate for the fourth quarter was 24.9 percent.

The remaining $3 billion came from the cost of moving cash that the bank held overseas back into the United States, as required under the new law.