Citigroup Takes $22B Charge on Tax Law Adjustments

The bank's earnings excluding the tax items beat estimates, with consumer banking posting a particularly strong quarter.
Matthew HellerJanuary 17, 2018

Citigroup on Tuesday reported a $22 billion charge due to the new tax law but its adjusted fourth-quarter earnings beat analysts’ estimates on strong growth in its consumer banking business.

Joining several other banks that have recalculated their tax position since the corporate income tax rate was cut from 35% to 21%, Citigroup said $19 billion of the charge reflected the diminished value of deferred tax assets. The other $3 billion related to repatriation of income made abroad.

Adjusted to exclude the tax items, the bank’s net income rose to $3.70 billion from $3.57 billion. Earnings per share rose to $1.28 per share from $1.14 a year earlier, topping estimates of $1.19 a share.

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Revenue came in roughly in line with expectations at $17.3 billion and was 1% higher than the fourth quarter of 2016.

“While our fourth-quarter results reflected the impact of a significant non-cash charge due to tax reform, the impact on our regulatory capital was much less significant,” Citigroup CEO Michael Corbat said in a news release.

“Tax reform does not change our capital return goals as we remain committed to returning at least $60 billion of capital in the current and next two CCAR cycles, subject to regulatory approval,” he added.

Citigroup’s star performer in the fourth quarter was consumer banking, which saw a 6% percent increase in revenue, to $8.4 billion. Revenue in investment and corporate banking fell 1% to just over $8 billion, while net credit losses rose 11% from the same period a year earlier, to $1.9 billion.

“We closed this important year with strong operating earnings of $3.7 billion in the fourth quarter, or $1.28 per share,” Corbat said. “We grew loans across both our consumer and institutional franchises and we continue to see good progress across
those products and geographies where we have been investing.”

On an unadjusted basis, Citigroup posted a net loss of $18.3 billion, or $7.15 per share. “Citigroup and other large U.S. banks are expected to be the biggest beneficiaries of the [tax] law over time,” The Washington Post said.