WSJ Summary: What the U.S. Tax Law Will Do to Bank Earnings

Features Dow Jones Newswires

Five of the biggest U.S. banks are likely to report a total of about $31 billion in charges relating to the new U.S. tax code in their fourth-quarter results, though they should benefit from the new law in the long term. The banks are Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, and Morgan Stanley.

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--Most of the charges stem from a reduction in the value of deferred tax assets, and a one-time tax of 15.5% on foreign-held liquid assets like cash, and 8% on illiquid assets.

--Deferred tax assets refer to past credits and deductions that companies can retain and use against future tax bills. However, when tax rates decline, these credits lose value and must be written down, which can cut into a bank's book value.

--Accounting laws require companies to reflect the new law's impact this quarter, but by 2019 large national and regional banks should see an average 15% boost in their earnings per share, according to Bernstein.

This is a summary of an article that was published on Dow Jones Newswires on Wednesday at 1030 GMT and is also available at http://on.wsj.com/2mmPJQj.

Write to Barcelona editors at barcelonaeditors@dowjones.com

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(END) Dow Jones Newswires

January 10, 2018 11:29 ET (16:29 GMT)