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Thursday, March 28, 2024

Citi Tumbles After CFO Warns Of $20 Billion Charge If Senate Tax Bill Passes

Courtesy of ZeroHedge. View original post here.

Citi stock tumbled, closing at session lows after the bank’s CFO John Gerspach  confirmed that the trading woes plaguing other banks would impact it as well, previewing Q4 trading as down “in the high teens.” The percentage decline in trading revenue from a year earlier is largely driven by the bank’s fixed-income unit, Gerspach said on Wednesday at an investor conference in New York.

He added that G10 rates- and G10 currencies-trading have been challenged in quarter, although the woes were offset by Citi’s co-brand credit-card deal with Costco Wholesale Corp. which has been a bigger success than expected.

However the bigger surprise was the Gerspach’s disclosure that he expects the bank to take a noncash earnings charge of about $20 billion if the Senate’s version of the tax reform bill is enacted.  He explaine that the hit to profit would result in part from writing down deferred tax assets in the period the bill is signed.  The number is far greater than what the company had provisioned, and analysts had expected previously expected a writedown of around $12 billion.

Which is odd since the entire tax law was written with banks pardon corporations in mind.

While there was no explanation as of publication time on what precisely would be the catalyst behind this massive loss – although it likely has to do with the impact of taxation on repatriated earnings – the stock was not happy and closed at session lows, dragging other money-center banks down with it.

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