Citigroup reports steep fourth quarter losses tied to United States tax reform

Citigroup reports steep fourth quarter losses tied to United States tax reform

Lower tax rates mean the bank can stick to its multiyear plan to pay out at least $60 billion in capital to shareholders even after booking a larger-than-forecast charge of $22 billion to adjust to the new tax regime, the bank said Tuesday. Banks have long paid some of corporate America's highest effective tax rates, which means they benefit more when rates are reduced. It forces them to take one-time hits on earnings held overseas and changes the treatment of deferred tax assets, both of which affect Citigroup in particular.

Bank of America Corp, the second-biggest US lender, and investment banking house Goldman Sachs Group Inc are expected to report fourth-quarter results on Wednesday.

But for Citigroup, the fourth-largest USA bank by assets, the loss is just a temporary hiccup.

Citigroup said Tuesday its effective tax rate will probably fall to about 25 percent this year and potentially lower afterward. That could save the bank billions of dollars over the next few years.

Citigroup Inc.'s (C) fourth-quarter profit was erased by a giant one-time charge related to the new tax law.

However, fixed income markets revenue decreased 18 percent due to continued lower volatility in the quarter as well as the comparison to a more robust trading environment in the prior year period as a result of the US elections.

Lagging competitors in growth and not earning its cost of capital, Citigroup's share valuations have not kept up with peers, such as JPMorgan and Bank of America. Analysts expected revenue of $17.22 billion.

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Citigroup today announced an enormous $22bn (£16bn) charge from Donald Trump's tax changes which pushed the USA bank to its first loss since 2009, but distracted from otherwise above-expectations results.

Adjusted to exclude the major tax charge, net income rose 4 percent to $3.7 billion. Earnings at the institutional-clients group, which houses the investment bank and the global payments business, fell 7 percent to $2.2 billion.

Fixed income markets revenue retreated 18% over the quarter, and equity markets revenue dropped 23% due to derivatives losses of approximately $130m from a single client.

The client is troubled South African furniture retailer Steinhoff International, a source familiar with the matter told Reuters.

Other banks including JPMorgan Chase are also taking such hits, although Citi's is particularly big.

The huge tax charges overshadowed what was an otherwise largely unremarkable batch of quarterly results.

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